UK Warriors - avoid losing 1000's of pounds & risking a lot more...

Hi,

Tomas - would it be within the VAT "rules" simply to include a line in your members' payment confirmations and/or terms of service that their payments include VAT at the "appropriate rate" or something like that.

Saq3m - sure, you can set up a web site and start trading though any money you make is certainly going to be taxable income. Essentially you have two choices - set yourself up as a sole trader or a limited company. Both have advantages and disadvantages.

Suggest you check out the HMRC web site for general guidance:
HM Revenue & Customs: Self Assessment and your tax return and HM Revenue & Customs: Starting up in Business may be of particular interest.

Would also suggest you seek an initial consultation with an accountant. Often free.

Good luck!

Andy.

If in doubt, contact your local branch of Business Link (UK). They will point you in the right direction re tax returns, insurance and everything else you need to know re being self-employed (sole trader)

I think (but I'm not 100% certain) that, as with an adult, you are allowed a personal allowance (tax free income) before you reach the level where you pay income tax. After that, I think you pay tax.

Is there a business studies teacher/tutor you could ask at your school? Does your school run Young Enterprise? If so, their advisor might be able to help you.

Everybody in the UK has a personal allowance, it does change depending on age, but you're not old enough to get the additional allowance.

Children (sorry but you are one ) can pay tax, and earning more than their personal allowance will mean you will have to pay tax. It has nothing to do with age, but income.

If people don't want to go to the government or an accountant for advice about startups, go to your bank. Many of them have great booklets which are easy to understand. Forget that, I'm an accountant and understand all things relating to the UK tax system. :rolleyes:

If you don't register then you will have penalties. If you don't pay your taxes on time in the UK, you are charged interest on a daily basis. If you overpay your taxes in the UK, then the government will refund with interest again worked out on a daily basis. I had someone who ended up with a tax bill of over £17K because they had made a mistake, but when they asked for my help I didn't have the heart to tell them they were looking at a bill of £17k + around £6K in interest.

Get it right, follow the system, keep everything even if you don't think you need it. Better to give your accountant too much than too little. Don't try and cheat the system, the accountant will spot it a mile off.

We've been through this several times before and it's worth looking it up with the search function. Martin Avis found some solid information about the tax threshold which stops us UK (and I thought all EU) marketers from having to worry about this problem.

However, you are wrong, Tomas, in one key aspect. With Clickbank, what happens is that you sell your product to Clickbank (ie outside the EU). Clickbank then resells the product to your customer (and has to deal with the VAT implications.) So that would be one good reason for you to use Clickbank ;-)

Pearson

I want to answer the student. I was a student when I started out on warrior forum and ebay. I made several thousand and managed to get my wife back from a foreign (outside EU) country with no visa using affiliate programs and ebay.

The thing is that the mindset of leaving the aspects of business, such as budgeting, forecasting cash flow, registering with the government etc aside whilst you "get rich quick" and take care of the formalities later can actually make more hassles for you later, when your accountant starts telling you about penalties etc, that you should have saved all your receipts and also when you find out that the government will pay you (working tax credits) for working as an employee in your own business (eg as director or a ltd co).

I'm not business advisor, can only speak from my experience. Launch properly. The free accountant appointment is a good idea, but I've found accountants are good at bogging you down in the law and the tax aspect, when really you're interested in the profit and the take home income ASAP aspect. To balance it I suggest taking a business link or other, hopefully complimentary, business start up course where you can learn the "basics of business" - and have a strong backbone for book balancing and cash flow, management purposes.

In short, go to your local chambers of commerce and ask them what programs they have, or the area have for new entrepreneurs. You may surprise yourself with what you find in terms of opportunities and support. It's not just the UK, but I just feel that entrepreneurial ideas are given more support in countries such as US and China for instance.

I believe this is because UK is a small island, dependent economically upon (financial) services sector, consumer spending & property market for the most part. UK in past would rather see consumers spending (even what they can't afford - ie taking out CREDIT - which has resulted in failure now with the subprime mortgage crisis in US - and UK similar tactics) rather than encouraging entrepreneurialism.

This is changing big time, and we will see many more people encouraged BY GOVERNMENT to start a home based business even. It is already a policy in to which huge amounts of money are being spent. Trust me on that.The government wants successful entrepreneurs now and are investing in people to become such - this is great news for startups.

Hi,

Standard rate UK VAT percentage has been reduced from 17.5% to 15% until 31 December 2009 - are ClickBank etc. taking that in to account does anyone know......?

You obviously haven't bought anything from Clickbank for a while! CB always add 17.5% VAT to the cost (hopefully they've taken into account the recent reduction) so they must be VAT registered.

I tried to avoid buying through CB for that reason.

US server and US shopping cart? No, that doesn't make any difference for sure. It does not matter where your webhosting server is located, that would be a nonsense.

The US payment processor may, technically, make a difference though. If you pick one that acts as a reseller and has no EU branch - e.g. 2CheckOut, you would be selling to a US based company (2CheckOut) which would then resell the products on your behalf.

When selling to a US company/customer, no EU VAT is involved. There is no Value Added Tax in the US anyway. Even if you sell to another country that does use VAT but is not a EU member country, you don't really need to care about VAT as in that case it would be the customer's responsibility to pay it to their authorities.

But before you go with 2CheckOut, search their name using the forum search feature. There was a very recent thread about it and it was not "overly positive".

To make things simple, just go with a 3rd party payment processor/reseller such as Clickbank or Regnow. They will automatically charge the EU VAT for you. As I mentioned before, Clickbank is not exactly my favourite payment processor (and yes, I know they are technically resellers) because they give me no chance to enter my EU VAT ID anywhere (unless they changed it recently).

Unfortunately, PayPal does not fall into the "reseller" category and will not take care of the EU VAT taxation automatically. You can set PayPal to add EU VAT to any order coming from EU based PayPal accounts (not sure if they detect the country automatically or you need to send them the proper variable from your script), but you will then have to send the VAT you got from your customers to the local financial authority yourself.

And of course, if you don't have one already, hire an accountant.

Tomas

Pearson,

Can you please clarify what I am confused about Clickbank. I believe the above quoted statement about it is true. But I may be missing something.

I learned most of the info about the EU VAT taxation on ecommerce info at E-Commerce - Taxation and Customs Union - European Commission and similar online resources, and after consulting with my accountant.

If I've made a mistake somewhere, please correct me and tell me where exactly. I am a big boy and can take it.

Tomas

Great discussion.

So, how does this fit if you are already full time employed (and pay tax via PAYE), but plan to make a few hundred a month through affiliate sales?

Would the additional income be taxed on top of what I already earn (and so get taxed at 40%), or is it possible to register a business/company/sole trader if you are already FTE elsewhere and keep separate accounts - so as long as your separate company didn't earn more than £4,825/year you wouldn't have to pay tax or N.I. on that income?

Also - I presume if I needed things like a new desk/laptop/monitor for the business, that could come out of any profits before paying tax? Similarly, any advertising spend would also come out before tax, correct?

You might want to check that again, saq3m. In my experience, the sole trader begins to pay Class 2 National Insurance contributions as soon as they register themselves as self-employed, regardless of what they are (or aren't!) earning. Class 4 NI contribs are addtional.