tax return problems?

Question

I am filling in my tax return for the first time this year. I started self-employed business on 20th January 2006. I decided to end my financial year on 5th April.

So when I send the tax return in this year I will need to send two sets of figures to the taxman – one set for the period 20th January 2006 to 5th April 2006 and another set for the period 6th April 2006 to 5th April 2007.

Now I am not sure how to put these figures into the self-employment part of the tax return form – the notes on the tax return website do not make it clear. Should I add the various figures from the two periods and put them on a single form? Or should I get another copy of the self employment pages and fill each set of figures in on separate forms? What is the correct way to do it? Any help would be much appreciated!

Answer 1

There appears to be a problem here which needs sorting out first.

You started self employment in January 2006 but say you are doing a tax return for the first time.

I assume you notified HMRC about your self employment by 30th April 2006. If so, you should have had a return to complete for 2005/06 and this should have been done by the end of January this year. Did you actually complete one but put in estimated figures (which is a perfectly acceptable procedure) or have you not been issued with one? The answer can affect the treatment of the accounts.

If you intend to send accurate accounts for the two periods then the 2007 return can only contain the figures for the year ended 5th April 2007. The initial short period should be included in the 2006 returm.

If you entered provisional figures for the 2006 return then you should show the combined figures for the whole of the period from 20th January 2006 to 5th April 2007 on the 2007 form. These dates should be entered in boxes 3.4 and 3.5 on page 1 of the supplement. Make sure you complete box 3.7 as well.

When you take the figures across to page 3 of the supplement box 3.76 will contain the taxable profit for the whole accounting period. You will need to enter the proportion relating to the period before 5th April 2006 in box 3.77 and deduct it from box 3.76 to arrive at the 2006/07 profit.

You will then have to correct the 2006 return by writing to HMRC and telling them the amount in box 3.77 which is, of course, to be the assessment for 2005/06.

Hope this is clear.

Answer 2

you need to complete a 2006 & a 2007 tax return.

we need to know if you have already completed a provisional 2006 tax return or not as this makes a difference to how you treat the figures.

normally you would complete 1 set of accounts to from 20th jan 06 to 5th April 06. These would then go on your 2006 tax return. Then you complete another set of accounts from 6th April 06 to 5th April 07 and these go on your 2007 tax return.

if you have completed a provisional 2006 tax return. you need to put the whole accounting period 20th jan 06 to 5th april 2007 on the 2007 tax return, then apportion the profits so you get the amount applicable to the 20th jan 06 to 5th april 06 period and enter this figure in box 3.77 on page 3 of the self employed forms so it reduces the profit applicable for the 2007 period.

you will also need to put a notes on the white spaces on page 10 of the main return form, explaining the what you have done and show the calculation you have used to make the adjustment to the profits for 2007.(the calc you need is 76/441 x profit for whole period = profits for 20th jan to 5th april 06.)

also on page 1 of the self emp pages, you need to put the full accounting period in the date boxes 3.4 & 3.5 and also the jan start date in box 3.7.

then on page 3 put the tax dates 6th april 2006 to 5th april 2007 in boxes 3.74 & 3.75 as this is the basis period (taxable period for this return)hope this is clear.

Answer 3

the best thing to do is ring up the local tax office that deals with your tax and they are fantasticly helpful, they helped me on the phone for over half an hour when i filled in my tax return
jan