Contractors' Questions: When to register for self-assessment as a partnership?

Contractor’s Question: When I initially researched registering for self-assessment as a partnership, I read on the HM Revenue & Customs website that, "You must notify HMRC within 3 months of becoming self-employed."

But this information has since disappeared from the HMRC webpage, and now I read on the Revenue site, under ‘Why and when you need to register for Self Assessment,’ that “You need to register for Self Assessment before you complete your first tax return." And, "The latest you should register is by October 5th after the end of the tax year for which you need a tax return."

I’m a bit stumped. Would this mean, if we were to start trading now, we would have to register before October 5th 2013? Or is the three-month window, initially on the HMRC site, still open? We don’t want to wait any longer than is necessary - we just want to try out some alternatives before registering.

Expert’s Answer: The information you reference is correct in that it forms part of the changes that came into force on April 1st 2010 and come under the Failure to Notify Penalty regime. Prior to this date you had to register for self-employment within three months of the start of that self-employment. Post-April 1st 2010, the deadline to register is the 5th of October following the end of the tax year.

For example: Self-employment starts August 29th 2011, Tax year ends April 5th 2012, and notification must take place by October 5th 2012.

On the face of it, this seems to be rather generous of the Revenue to allow such a long period; it is possible to be self-employed for 17 months before having to notifying the tax authority. However, the new rules also allow the Revenue to impose automatic penalties (fines) for failure to notify of self-employment.

You need to allow enough time to register and await authorisation before you can submit an online return and if you intend to file a paper return and have HMRC calculate the tax for you, this needs to be submitted prior to September 30th. The deadlines for Self Assessment  tax returns are:

  • September 30th for paper and online returns, if you want HMRC to calculate the tax due
  • October 31st for paper returns but you must calculate the tax due
  • January 31st for online returns but you must calculate the tax due

In addition to notification of self-employment for personal tax, you also need to bear in mind the legislation around National Insurance, specifically Class 2. You must tell HMRC that you need to register for National Insurance contributions by the 31st January filing deadline. The Forms needed are an SA1, to register for Self Assessment, and CWF1, for Self Employed National Insurance.

The expert was Martin McKechnie, a director at the Low Tax Group, a specialist accountant for contractors and one-person businesses.

 

Friday 29th June 2012