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Posted Thu, 20 Oct 2022 13:03:41 GMT by E U
I am self-employed, providing advice to an organization's client's, via that organization. The organization's client's contract is with the organization, not me. The organization's clients pay the organization for the service and I then invoice the organization, for the cost paid by the client minus a percentage fee that goes to the organization. I am completing self-assessment. Income will be reported on a cash basis. In some tax years the service provided may span 2 tax years. I am also employed by that organization for a very small number of hours. 1. Would my gross income for self-assessment be classed as the amount that I receive into my bank from the organization (i.e. not including the organization's percentage fee) or would it be the amount the organization was paid by the client (and so I would then need to class the organization's fee as an expense)? 2. Can I claim trading allowance or am I precluded from claiming that as I am also employed by the organization? If I am precluded can I instead claim for actual expenses incurred? 3. Do I need to tick the box that says "I provide my services under contracts for professional or other services and these contracts span my accounting date" if for that year the service will be provided across 2 tax years? Thank you
Posted Tue, 25 Oct 2022 09:41:51 GMT by HMRC Admin 17

Hi,
 
1. As a self employed individual/sole trader, how you report your income depends on whether you use the Cash Basis (where you only record income you actually received in a tax year, and you do not count any money you are owed but have not yet received); or Traditional Accounting
( where you record and declare income and expenses based on the date you were nvoiced or were billed). 

2. You describe yourself as self-employed in your opening sentence, so you can choose to claim either the trading allowance, or the actual expenses incurred in a given tax year. 

If you are unsure about your employment status - ie, whether you are regarded by HMRC as employed or self employed - you can use
HMRC's 'Check Employment Status' tool for clarification:

Check employment status for tax .

3. Please refer to my answer to your first question:

Cash basis  and :

Business records if you're self-employed     .

Thank you.
Posted Mon, 31 Oct 2022 11:43:37 GMT by E U
Hi, Thank you for your reply, which I have considered, but please forgive me as I am still not clear what your answers are to my original questions, which I would be grateful if you could please answer. Please see the first paragraph of my original post for relevant background details. My questions: 1. Would my gross income for self-assessment be classed as the amount that I receive into my bank from the organization (i.e. an amount not including the organization's percentage fee) or would it be the amount the organization was paid by the client (which is higher than the amount paid into my bank account as it includes the organization’s percentage fee and so I would then need to class the organization's fee as an expense)? As noted in my original post I am reporting on a cash basis and my query is not regarding which tax year I report the income or expenses in/ whether to report using the cash or traditional basis. 2. Can I claim trading allowance or am I precluded from claiming that in respect of my self-employment, as I am also employed by the organization? If I am precluded can I instead claim for actual expenses incurred? I am not unsure about my employment status for tax purposes (which is self-employed (sole trader) in respect of the income I am reporting via self-assessment. I am also employed by the organization for a very small number of hours in respect of other work) and I am aware that ordinarily, a person can choose to claim either the trading allowance, or the actual expenses incurred in a given tax year. However, my above query is in light of the following extract from the Business Income Manual: “BIM86036 - TMIA - Exclusions: Employers No relief is due to an individual for a tax year if the individual has relevant income for the tax year, and the relevant income includes a payment made by, or on behalf of a person, at a time when: - the individual is either; - employed by the person,or - the spouse or civil partner of an employee of the person. This excludes individuals who receive trading income, or miscellaneous income from, or on behalf of, their employer or from their spouse or civil partner’s employer. This exclusion does not apply to employment income received from an individual’s employer or their spouse or civil partner’s employer.” 3. Do I need to tick the box that says "I provide my services under contracts for professional or other services and these contracts span my accounting date" if for that year the service will be provided across 2 tax years? I have read the links in the reply and your reply to question 1, but they do not seem to answer my question. Many thanks,
Posted Mon, 07 Nov 2022 12:36:56 GMT by HMRC Admin 32
Hi,

The return on this loan is treated as interest and is taxable under income, not capital gains. 

Thank you.

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