More and more people are holding parties at home where the agent comes to your home and sells their products, or posts a catalogue to you. Did you know that you should be declaring this income? Examples of this are Pampered Chef, Body Shop, Avon, Betterware etc
The problem is a lot of these agents fail to inform you that this income is in fact taxable, and needs to be declared to HMRC via a tax return each year. This then needs to be declared when making your annual Tax Credit Renewal.
If this is your only income, then the chances are that you may not owe any tax, but you could still be fined for not declaring that income. The personal allowance for 2012/13 is £8,105, so any profits below this are not taxable.
What is direct selling?
Direct selling is when you sell directly to customers usually door to door or in customers’ homes or the workplace. Companies use different terms for the people who sell their products – you may be an ‘agent’, a ‘consultant’, a ‘representative’ or a ‘distributor’.
Your selling may involve demonstrating a product in a customers’ home, sometimes at a party, or you might sell door to door, using catalogues. You might only sell to your friends and relatives. As a direct seller you will usually take commission on the sales you make.
You may be involved in direct selling as a full time business, to top up your income from another job or to fit around your caring commitments.
What are your responsibilities as a self-employed direct seller?
As a direct seller you are generally considered to be self-employed. This means that you are responsible for telling HMRC about what you earn and calculating and paying your own tax.
Not everyone in the direct selling industry is self-employed. If you are a direct seller and you are unsure, you could start by checking any contracts, agreements or information sent to you by the company whose products you sell.
You can usually work out if you are self-employed by asking yourself a few simple questions.
If you are a direct seller and you can answer ‘yes’ to all of the following questions, you are probably self-employed:
- Do you have responsibility for your business?
- Can you decide how and when you do your work?
- Are you paid on a commission only basis?
- Do you risk your own money in setting up and running your business?
- Do you receive no holiday or sick pay from the company you represent?
- Can you hire other people to help you or do the work for you?
When you are self-employed you are responsible for telling HMRC about your income and paying tax and National Insurance yourself.
You can be employed and self-employed at the same time, for example working for an employer during the day and working for yourself in the evenings or at weekends.
If you believe that you are a direct seller and have not been declaring your income, please do contact us as soon as possible, and one of our experienced accountancy team will be happy to help you put it right. We are a family firm based in Hastings and St Leonards, offering affordable fixed fees to all. Please contact us now for a no obligation quote, and arrange a meeting with one of our team
Guest article by Kellie of www.knightaccountants.co.uk