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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3944
Experience:  FCCA FCMA CGMA ACIS
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I am an additional rate/ higher rate tax payer employed full

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I am an additional rate/ higher rate tax payer employed full time. I have an idea to start an app-based business on the side. To start with, this will involve me investing time and money in development costs for a developer firm to work up a prototype/ assist me with the coding aspects. I would like to maximise the tax efficiency of this venture, such that if it does not work out, I can potentially offset some of my losses against the very large amount of PAYE tax I pay. I am unsure where to start from a structuring perspective. Thanks a lot in advance! Alex
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Alex, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. My first reaction was that you would be better to set up a limited company to do this and thus be subject to Corporation Tax (CT) at 20%. However, I see you anticipate losses in the early years so it would be more tax beneficial to offset these against other PAYE income. If you start to make profits you can always set up a company and transfer the business thereto. So what to do. Well first register with HMRC as self employed. You can do this in parallel to PAYE employment, thousands of people do. HMRC will then arrange for you to receive forms for a self assessment tax return at the end of each tax year, which you might be doing anyway. Then set up your business maintaining normal books of account and closing same annually into a profit and loss and balance sheet to support your tax return. It really is that simple. You do not need to register for VAT until your turnover in a year reaches the threshold, currently 82K, so that is another chore you do not have to worry about. It really is that simple. I do hope that you have found my answer of assistance.
Customer: replied 1 year ago.
Thanks a lot Keith - do you have any good links for advice on what types of records I need to maintain/ what would be allowable as expenses? I anticipate invoices from contractors, IT expenses and potentially some website design costs being the only expenses - and most likely no revenue in year 1.
Expert:  bigduckontax replied 1 year ago.
Right Alex, all those expenses are wholly and necessarily incurred in connection with your business. You should maintain a file of income and expenditure vouchers. Any big stationer will have business accounting books at modest cost which you could use to maintain your financial records. You will make a substantial loss in year one, but that is not unusual in a first year of trading.
Expert:  bigduckontax replied 1 year ago.
Right Alex, all those expenses are wholly and necessarily incurred in connection with your business. You should maintain a file of income and expenditure vouchers. Any big stationer will have business accounting books at modest cost which you could use to maintain your financial records. You will make a substantial loss in year one, but that is not unusual in a first year of trading. You could, of course, appoint a book keeper to maintain your accounts for a modest fee.
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Customer: replied 1 year ago.
Great - thanks a lot!
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance. Thank you for your support.

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