Frequently Asked Questions - Network Marketing and Tax
23rd July 2019
Question: Can I claim my gym membership and clothes as a business expense for my health product network marketing business?
Answer: Unfortunately not, as they are not wholly and exclusively for the business. Generally speaking, you can claim for expenses that you incur as part of your business set up or operations. This would include expenses for travel, subsistence, office costs and promotional items. For a more extensive list please see this previous blog.
Question: I'm looking to set up my network marketing business. What business structure is best for me?
Answer: When you first start out, we would usually advise you to set up as a sole trader if you are on your own, or as a Partnership when you are running your business with someone else. This is because if you make a loss in the early years, you can offset it against other income and potentially obtain a tax refund. This is not possible if you are operating through a Limited Company.
As the business progresses and matures, your business structure can be changed to a Limited Company, or a Limited Liability Partnership. There are specific advantages to these types of trading structures which we can advise you on.
Question: Do I have to pay National Insurance?
Answer: Yes, if you are self-employed and making a profit you will need to pay your National Insurance contributions. There are two types of National Insurance to pay - Class 2 and Class 4. Class 4 is 9% on most of your profits, which can quickly add up. It's also worth noting that National Insurance is part of your overall tax bill, so doesn't need to be paid separately.
If you are not making a profit or if you are past retirement age, you do not need to pay National Insurance.
Question: I've just set up my sole trader business, when do I need to file my first self-assessment tax return?
Answer: Many self-employed people believe that they don't need to complete a tax return until they are making a profit, which is advice they often receive from friends and business associates. Unfortunately, this is not true.
You need to register with HMRC as soon as you start trading and complete a self-assessment tax return by the 31st January deadline of the following year. There are significant fines levied by HMRC for not registering for self-assessment when you should.
Here are PRB Accountants, we offer a free initial consultation for Network Marketers. Please contact us on 01444 458252 or email@example.com.