Freelancers' Questions: Was my one-off job taxable?
Freelancer’s Question: I didn't work last year except one little job which was under £500. My client asked me for a receipt which I issued using my real address and some fictitious business name to look important. Yet I was neither registered as self-employed nor had my own company at that time. I think that if my income is below a certain threshold (£6,035 for 2008/09) I don't have to pay tax. But because I issued a receipt for the client and used a fake business name, I wonder what consequences I might now face? Does HM Revenue & Customs check such receipts? Should I submit a tax return this year because of it, or is there no need as my income is below the threshold? However, the fact that I used a fictitious business name worries me. Should I expect an unhappy taxman?
Expert’s Answer: The income of £500 you received would not be employment income or income of a company (as no company has been incorporated). It would be regarded as self-employment income. This raises a number of issues including registering as self-employed with HM Revenue & Customs, payment of Class 2 and Class 4 NICs, and completing a self assessment tax return.
However, assuming you had no other income in the year (including no income from investments, pensions, employment, and no rental income) and assuming that this was a one-off piece of work and you do not intend to carry out similar work in the future, then we would advise you to contact your local tax office and explain the situation.
They will in all likelihood tell you that, based on the just-mentioned assumptions, there will be no need to register as self-employed or complete a tax return. Ask them to confirm this in writing and keep a copy of any letter you receive to help reduce the fear factor!
HMRC's principal objective, despite what anyone tells you, is to collect as much tax as possible - there is no tax at stake here and even the potential late registration penalties would be minimal. So from HMRC's point of view, the administrative costs of dealing with your tax situation far outweigh any potential income they might derive.
The expert was Alasdair McGill, managing director of Freelance World, an accountancy firm for freelancers.