JoelP
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| posted on 23/8/08 at 11:13 AM |
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an idea to save money
it occured to me a while ago, but never remembered to mention it.
Basically, when you get into kitcars, register a business with HMRC, stating that you are in the business of manufacturing/assembling kitcars. Then
all the tools and stock you buy are business expenses, when you never actually sell a kitcar you make a recorded capital loss, which you can then
offset against your wage. Hence, tax free hobbying.
Can anyone explain why it wouldnt work?
If you spent £2k on tools and £10k on a kit, you would save 20 or 40% of £12k, ie up to 5 grand. You could then get the finished car sign written to
promote your business and then have an excuse to drive it around.
Totally legitimate too unless im mistaken?
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mr henderson
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| posted on 23/8/08 at 11:21 AM |
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You would need to convince HMRC that it was a serious attempt to establish a business, and if you could do that then you should be OK. You would need
to sell the car, of course, at a loss.
The rules concerning tools are a bit vague. Some accountants go by their cost, less than £100 (for instance) then they go down as general expenditure,
over £100 (for instance) then capital which has to be rediced each year as depreciation.
I think the main problem would be convincing them that it was a serious business. You would almost certainly need to show advertising expenses, and if
you were keeping your existing job then you would probably come in for some close scrutiny
John
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robinj66
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| posted on 23/8/08 at 11:38 AM |
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If you did set yourself up as a car building business you would have to meet far more stringent emissions at the SVA than an amateur built car.
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smart51
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| posted on 23/8/08 at 12:06 PM |
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quote:
Originally posted by robinj66
If you did set yourself up as a car building business you would have to meet far more stringent emissions at the SVA than an amateur built car.
What are the "tougher" emissions for professionally built cars?
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paul the 6th
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| posted on 23/8/08 at 12:58 PM |
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I set up my own graphic design/sign writing company three years ago so I went through the HMRC (formerly "HM Customs" and "Inland
Revenue" as two seperate organisations).
I registerred with HM Customs for VAT so I could claim the 17.5% back on everything I buy for the business, but I legally have to whack 17.5% on top
of everything I sell, and then send them a big fat cheque for the difference between the two amounts, every three months. (when I registerred for
vat, it wasn't obligatory to do so unless you turned over £56k a year or more. It has changed up to £67,000 since. You can still register for
vat voluntarirly even if your turn over is quite low...)
Inland revenue deal with your employment status, so they list you as "Self Employed" for the tax side of things. "Regular"
workers who are employees of companies usually pay their tax on "PAYE" ("pay as you earn" calculated on a monthly basis)
whereas the self employed usually operate on "Self Assessment" where you have to keep a record of all your 'drawings' which
aren't anything to do with your business earnings and pay it in one lump sum. So if I turned over £50k in a year, but I'd paid myself
£15K, I'd have to pay tax on that corresponding to the tax banding system.
The tricky bit would be if you keep your current job along side your new "self employed status". I'm not 100% on it, but my gf
looked into getting a second job to supplement her crap wage, and found out that earning a little bit more in a second job would actually give her
less money at the end of each month, because she was taxed so much more. "Work twice as hard, earn less than half. Don't work at all and
get money for free..." what a country.
I'm not 100% on the SVA side of things but I think I've read the phrase "To qualify for amatuer built status, you have to prove that
you don't have a business involved in constructing motor vehicles or you'll be subject to a tougher inspection." A bit like trading
standards & health and safety type stuff. For example, if I started making mini gas bbq's for a hobby with my welder, cheap bits of metal
& bits from a camping shop, and sold them on ebay it would be just about ok. If I set up a business selling them, there would be alsorts of legal
mess if one of my bbq's caused injury or a death because it was poorly constructed. Same if it wasn't fit for purpose, trading standards
would have me for that.
Oh and someone said above, "You would have to sell the car". HMRC can't dictate what you do with your business. If you buy a load of
kit to start a business and then don't sell anything they can't come along and say "Oi, sell some products..." you just
declare a loss. And you wouldn't need to show expenses for adverstising (I don't technically advertise apart from business cards and my
website). All they're really bothered about is that you're not fiddling your accounts and short changing them of their hard earned money.
As long as you have a set of accounts to show what you've bought, anything you have sold, and receipts to back up the information in your
accounts, and more importantly, all this information is accurate, correct and TRUE, HMRC cannot tell you how to run your business or what you should
be doing. If you lie, you'll get fined (alot), and if you tell a alot of lies or a very big lie, you'll probably go to prison as well.
If you can stick to this, it's a legitimate 'venture' and the only tricky bit would be keeping your current job and being
registerred as self employed (which is possible since I had a mate who worked for a big company as an IT consultant and DJ'd in night clubs as
self employed. You just might have to pay more tax).
Hope some of these comments help, they're just my initial thoughts on the idea & I'm not saying "it wont work" or
"don't be stupid". There could well be ways to do this without it affecting your current job.
Some useful links:
http://www.businesslink.gov.uk/bdotg/action/detail?type=CAMPAIGN&itemId=1081015661&r.li=1081015865&r.l1=1073859955&r.l3=1073860000&
;r.l2=1075326033&furlname=businesshelp&furlparam=businesshelp&ref=http%3A//www.google.co.uk/search%3Fhl%3Den%26q%3Dvat%2Cregistration%26bt
nG%3DGoogle%2CSearch%26meta%3D&domain=www.businesslink.gov.uk - search for "Self Employed Status", "Self Assessment" and
"Vat Registration"... should find all the info you need 
http://www.google.co.uk/search?hl=en&q=vat+registration&btnG=Google+Search&meta=
[Edited on 23/8/08 by paul the 6th]
GoDesign.me.uk - Self Adhesive Vinyl Artwork, Wide Format Printed Artwork and Customised Heat
Pressed Clothing...
--------
http://picasaweb.google.com/haynesroadster - Roadster Photo Build Log
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NOTE:This user is registered as a LocostBuilders trader and may offer commercial services to other users
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graememk
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| posted on 23/8/08 at 12:58 PM |
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when you get a vat number they send out a couple of suits to check it out a few week later
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StevieB
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| posted on 23/8/08 at 01:24 PM |
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quote:
Originally posted by graememk
when you get a vat number they send out a couple of suits to check it out a few week later
Or they just ring you up and talk through it, in my own experience.
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mr henderson
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| posted on 23/8/08 at 02:04 PM |
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quote:
Originally posted by paul the 6th
Oh and someone said above, "You would have to sell the car". HMRC can't dictate what you do with your business. If you buy a load of
kit to start a business and then don't sell anything they can't come along and say "Oi, sell some products..." you just
declare a loss. And you wouldn't need to show expenses for adverstising
That wasn't "someone", that was me.
The point here is about convincing the HMRC that what you are running is a genuine business. Now you may not have to do certain things in order to
stay inside the law, but if you don't do them, how are you going to convince them that you are attempting to run a business?
In your case, you are running a business because you have customers, but in the case originally postulated by Joel there were no customers. He would
need to do something to show that he was attempting to run a business and get customers (the advertising) , and making a loss. Until the car was sold,
where would be the loss?
John
[Edited on 23/8/08 by mr henderson]
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mr henderson
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| posted on 23/8/08 at 02:25 PM |
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quote:
Originally posted by paul the 6th
The tricky bit would be if you keep your current job along side your new "self employed status". I'm not 100% on it, but my gf
looked into getting a second job to supplement her crap wage, and found out that earning a little bit more in a second job would actually give her
less money at the end of each month, because she was taxed so much more. "Work twice as hard, earn less than half. Don't work at all and
get money for free..." what a country.
Getting a second job can look bad as all your tax allowances will be used up by the first job, and the second job would be fully taxed, may even move
the person into a higher tax band.
If the second job is self employed, though, then there's no PAYE, it's up to the person to pay tax on the profits they make. So if
there are no profits then there's no tax, maybe if there is a loss then you could get a tax rebate on the tax paid on the paye job. As I said
before, it's all about convincing the tax people that it is a genuine business.
If the person is registered fror VAT then they can still keep their normal job as the earnings from employment are not VATable.
Registering for VAT is a bad idea unless most or all of your customers are VAT registered
John
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paul the 6th
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| posted on 23/8/08 at 02:45 PM |
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quote:
Originally posted by mr henderson
In your case, you are running a business because you have customers, but in the case originally postulated by Joel there were no customers.
quote:
Originally posted by mr henderson
Registering for VAT is a bad idea unless most or all of your customers are VAT registered
John
So if you have no customers, it's not a bad idea to register for vat then?
Like I said it's a tricky idea but someone might be able to make it work and save some money during a build. The loss would be embedded in the
fact that you've bought a load of kit & materials, and not sold anything.
You're putting alot of emphasis on "making it look like a proper functioning business", which makes sense - after all it's
about convincing the man you're proper. A good "cover" could be to sell small bits like wishbones just above cost price. Then
you're not competing with the likes of MK or other established suppliers but you're still "selling" to
"customers"... therefore = proper business... And the fact you've only sold 4 wishbones this year, at a total cost of 160 quid, but
you've spent a fortune on tools and materials = loss.
So, to reiterate, this could be a good idea if you can find the right loopholes - the only tricky area would be the tax & earnings issue with
having 2 jobs (oh and keeping the sva guys sweet with your "Amatuer build status"
Hope this helps
[Edited on 23/8/08 by paul the 6th]
GoDesign.me.uk - Self Adhesive Vinyl Artwork, Wide Format Printed Artwork and Customised Heat
Pressed Clothing...
--------
http://picasaweb.google.com/haynesroadster - Roadster Photo Build Log
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NOTE:This user is registered as a LocostBuilders trader and may offer commercial services to other users
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RK
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| posted on 23/8/08 at 02:46 PM |
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By the time you pay your accountant to sort it all out at the year end, you will lose all your savings gained by any tax advantage. The government (in
the UK as in Canada) take the concept of a "business" seriously, and want you to make a serious attempt to make money, not lose it. And
they will check, if they are anything like the tax people in this country.
What I am doing, is running my car costs through my regular business as an advertising/promotional item. This is what I did when I raced mountain
bikes. Of course, I can only do this once it's actually on the road stickered up with my company logo.
There is no free lunch, and the VAT end of it alone will be a big pain in the bum.
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mr henderson
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| posted on 23/8/08 at 02:59 PM |
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quote:
Originally posted by paul the 6th
quote:
Originally posted by mr henderson
In your case, you are running a business because you have customers, but in the case originally postulated by Joel there were no customers.
quote:
Originally posted by mr henderson
Registering for VAT is a bad idea unless most or all of your customers are VAT registered
John
So if you have no customers, it's not a bad idea to register for vat then?
Like I said it's a tricky idea but someone might be able to make it work and save some money during a build. The loss would be embedded in the
fact that you've bought a load of kit & materials, and not sold anything.
You're putting alot of emphasis on "making it look like a proper functioning business", which makes sense - after all it's
about convincing the man you're proper. A good "cover" could be to sell small bits like wishbones just above cost price. Then
you're not competing with the likes of MK or other established suppliers but you're still "selling" to
"customers"... therefore = proper business... And the fact you've only sold 4 wishbones this year, at a total cost of 160 quid, but
you've spent a fortune on tools and materials = loss.
So, to reiterate, this could be a good idea if you can find the right loopholes - the only tricky area would be the tax & earnings issue with
having 2 jobs (oh and keeping the sva guys sweet with your "Amatuer build status"
Hope this helps
[Edited on 23/8/08 by paul the 6th]
The point you haven't grasped, is that if you pay a lot for materials, and don't sell them, then you haven't lost any money,
therefore the scheme has failed. No loss, no tax advantage. It's simple if you think about it. If you've stil got the vast majority of
what you spent the money on ie the car, where is the loss?
Hope that helps
John
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graememk
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| posted on 23/8/08 at 04:16 PM |
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quote:
Originally posted by StevieB
quote:
Originally posted by graememk
when you get a vat number they send out a couple of suits to check it out a few week later
Or they just ring you up and talk through it, in my own experience.
i have 3 vat numbers all ltd companies and every time they have come out to see.
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JoelP
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| posted on 23/8/08 at 04:29 PM |
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quote:
Originally posted by graememk
quote:
Originally posted by StevieB
quote:
Originally posted by graememk
when you get a vat number they send out a couple of suits to check it out a few week later
Or they just ring you up and talk through it, in my own experience.
i have 3 vat numbers all ltd companies and every time they have come out to see.
when i went vat registered they never checked, never called, not heard owt from them in 4 months except the obvious demands for money. As all my
customers are VAt registered its win win, ive saved over a grand so far id guess.
Id say the money spent on materials would constitute a loss, plus 50% of your tool pool.
The idea came from the fact that my business is fitting kitchens, but i tried to describe it as vaguely as possible so that i could run other ventures
without having to change tax details. At one point i just called it JP Developments, which doesnt give any clues at all!  I dont really have many
tools in the garage, whenever i fiddle with cars its the tools from the van i use.
The accountant doesnt cost zip. I do my own self assessments, and pay a local lass £100 a year to run the PAYE for the employees. Keep good records
and its as simple as pie.
In fact, in 8 years of self assessments ive NEVER had a call from the tax man at all. I guess they are too busy to check everyone. I run it as
straight as possible anyway, nowt worse than getting caught out!
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mr henderson
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| posted on 23/8/08 at 04:47 PM |
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quote:
Originally posted by JoelP
Id say the money spent on materials would constitute a loss,
Only when you have used or sold them. Until then they are just stock.
quote:
Originally posted by JoelP
plus 50% of your tool pool.
Depreciation at 50%, normal accounting procedure.
And, of course, as we all know, special tax rules apply to cars.
John
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