A question re self-employed/contractor

[Spirea28]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

[hav_2_get_hsmp]

Gross profit = Sales/income - Expenses

Net profit = Gross profit - (any) taxes

Net profit is what you can pay yourself as dividends. This money could either be in your company accounts or in your personal accounts. All you have to do is provide proofs (company returns, dividend vouchers, accountant letter) for net profit wherever it is.

[Spirea28]

Gross profit = Sales/income - Expenses

Net profit = Gross profit - (any) taxes

Net profit is what you can pay yourself as dividends. This money could either be in your company accounts or in your personal accounts. All you have to do is provide proofs (company returns, dividend vouchers, accountant letter) for net profit wherever it is.

Thanks for shedding some light on this!! I have another question please - so should I use my net profit or gross profit to claim points?

Thanks again for your advice

[ChetanOjha]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

It depends on how you run your company. E.g. If you are taking dividends out of the company...then you be assessed based on dividends+salary(min) you are taking out from your companay.

If you are keeping all your earning in company only i.e. not taking any dividends etc. then you have to submit lot of documents vix. invoices/bank statement(company) etc etc.

Straight forward way is to take dividends from company..and submit dividend vouchers,letter from accountants,personal bank statement for earnings.

[Spirea28]

It depends on how you run your company. E.g. If you are taking dividends out of the company...then you be assessed based on dividends+salary(min) you are taking out from your companay.

If you are keeping all your earning in company only i.e. not taking any dividends etc. then you have to submit lot of documents vix. invoices/bank statement(company) etc etc.

Straight forward way is to take dividends from company..and submit dividend vouchers,letter from accountants,personal bank statement for earnings.[/quote]

Thanks chetanojha for the information...

I do not operate thru a company - basically am a designer working on a contract by contract basis. So everytime I finish a job, I invoice the company and then I either get a cheque or direct transfer of funds to my bank account. Hence, all my earnings are clearly shown on my bank statements. If I provide these statements + a letter from my accountant confirming my gross profit - would that be enough?

Many thanks!

[ChetanOjha]

It depends on how you run your company. E.g. If you are taking dividends out of the company...then you be assessed based on dividends+salary(min) you are taking out from your companay.

If you are keeping all your earning in company only i.e. not taking any dividends etc. then you have to submit lot of documents vix. invoices/bank statement(company) etc etc.

Straight forward way is to take dividends from company..and submit dividend vouchers,letter from accountants,personal bank statement for earnings.

Thanks chetanojha for the information...

I do not operate thru a company - basically am a designer working on a contract by contract basis. So everytime I finish a job, I invoice the company and then I either get a cheque or direct transfer of funds to my bank account. Hence, all my earnings are clearly shown on my bank statements. If I provide these statements + a letter from my accountant confirming my gross profit - would that be enough?

Many thanks!

You will also need to provide invoices to prove your earnings for the same.

[Spirea28]

You will also need to provide invoices to prove your earnings for the same.

Thanks again chetanojha - I have all the invoices on file...I was wondering if one only needs to submit 2 pieces of evidence from different sources to prove previous earnings claimed? In my case, do you think bank statements + accountants letter is suffice? Or you think providing invoices would make things clearer to the case worker?

Sorry if I am a bit pendantic here....sometimes am confused if I shall submit more but worried I would confused the case worker.

[ChetanOjha]

You will also need to provide invoices to prove your earnings for the same.

Thanks again chetanojha - I have all the invoices on file...I was wondering if one only needs to submit 2 pieces of evidence from different sources to prove previous earnings claimed? In my case, do you think bank statements + accountants letter is suffice? Or you think providing invoices would make things clearer to the case worker?

Sorry if I am a bit pendantic here....sometimes am confused if I shall submit more but worried I would confused the case worker.

Yes you are right. You can submit accountant letter+bank statement. But money in your bank account you should be proved? Invoices will fill the gap. You have to submit the corroborative evidence.

[Spirea28]

Yes you are right. You can submit accountant letter+bank statement. But money in your bank account you should be proved? Invoices will fill the gap. You have to submit the corroborative evidence.[/quote][/quote]

Thanks for the advice again. By "proved", do you mean I shall indicate who has paid me (am thinking here of money where I were issued a cheque so the name of the employer did not show on bank statement) - and invoices shall fill the gaps. Would it be clearer if I ask my employer to write me a letter to confirm the amount?

[republique]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

depends on the expense
you mean profit, true profit meaning sales minus expensese the company incurrs.
If you pay yourself your full profits then that is your gross income but you have to pay yourself to declare it. Not say I made this much from the company or it isn't income. tadah

[Spirea28]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

depends on the expense
you mean profit, true profit meaning sales minus expensese the company incurrs.
If you pay yourself your full profits then that is your gross income but you have to pay yourself to declare it. Not say I made this much from the company or it isn't income. tadah

Hi republique,

Thanks for the clarification. I am slightly confused however and would appreciate any further advice. Basically I do no operate thru a company/ltd. I am a self employed contractor - so for example, I earned x amount from my contracted work (as exactly shown on my 12 months bank statements). Expenses for a self employed contractor includes utilities bills/travel expenses/stationary, etc, not covered by my employers. My question is - shall I claimed my gross earnings or earnings minus expenses? Or the home office basically would not take into consideration of expenses, in which case, only my gross earnings are relevant?

Am quite confused - would really appreciate your and anyone from this forum's advice.

Many thanks!

[republique]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

depends on the expense
you mean profit, true profit meaning sales minus expensese the company incurrs.
If you pay yourself your full profits then that is your gross income but you have to pay yourself to declare it. Not say I made this much from the company or it isn't income. tadah

Hi republique,

Thanks for the clarification. I am slightly confused however and would appreciate any further advice. Basically I do no operate thru a company/ltd. I am a self employed contractor - so for example, I earned x amount from my contracted work (as exactly shown on my 12 months bank statements). Expenses for a self employed contractor includes utilities bills/travel expenses/stationary, etc, not covered by my employers. My question is - shall I claimed my gross earnings or earnings minus expenses? Or the home office basically would not take into consideration of expenses, in which case, only my gross earnings are relevant?

Am quite confused - would really appreciate your and anyone from this forum's advice.

Many thanks!

It doesnt matter you are not a limited company, you incurred expenses as part of your business, thus your invoice amount is not your income and you still have to pay yourself in a clear manner if you had, you would know what is your income.

[Spirea28]

Hi all,

I understand that as a contractor, the earnings that will be assessed are the profits I earn before tax. I was wondering by profits does that mean income minus expenses?

Many thanks for your advice!

depends on the expense
you mean profit, true profit meaning sales minus expensese the company incurrs.
If you pay yourself your full profits then that is your gross income but you have to pay yourself to declare it. Not say I made this much from the company or it isn't income. tadah

Hi republique,

Thanks for the clarification. I am slightly confused however and would appreciate any further advice. Basically I do no operate thru a company/ltd. I am a self employed contractor - so for example, I earned x amount from my contracted work (as exactly shown on my 12 months bank statements). Expenses for a self employed contractor includes utilities bills/travel expenses/stationary, etc, not covered by my employers. My question is - shall I claimed my gross earnings or earnings minus expenses? Or the home office basically would not take into consideration of expenses, in which case, only my gross earnings are relevant?

Am quite confused - would really appreciate your and anyone from this forum's advice.

Many thanks!

It doesnt matter you are not a limited company, you incurred expenses as part of your business, thus your invoice amount is not your income and you still have to pay yourself in a clear manner if you had, you would know what is your income.

Hi republique,

This is where I am most confused by....I am a designer so there isn't any expenses that are related to each projects specifically. My professional expenses are things like rent, stationary, utilities bills, etc. In this case, as stated on the guidance notes, I suppose a letter from my accountant confirming my gross income (invoice amount) - expenses, would fullfill the evidence I need to provide for earning assessment?

big thanks again!