There is a common myth in the Network Marketing sector that you don’t need to submit a tax return until you start to make a profit. This is not true and could potentially be very costly.
The correct answer to this question is that you should register for self-assessment, and subsequently submit a tax return, as soon as you start to trade. In the context of a network marketing business trading can mean one of two things:
1. Starting to sell product
The danger in “keeping your head below the parapet” and not registering for self-assessment is HM Revenue & Customs may discover that you are trading and then levy very significant fines for non-submission of tax returns. These can run into several thousands of pounds. We have had a number of clients who, before coming to us, have received these fines which are non-negotiable.
Because it is easy money for HM Revenue & Customs to collect, they have already engaged in specific campaigns to identify those people that are trading but not submitting tax returns. The two campaigns that have occurred so far are:
1. The Direct Selling Campaign
No doubt there will be further campaigns in the future and as HMRC become ever more sophisticated from an IT perspective, more and more people will be identified and fined.
So, it is imperative that network marketers get their affairs in order from day one. As soon as they start to trade, they should register for self-assessment and keep proper books and records.
Here at PRB, we have dealt with thousands of network marketers over the years and have a range of solutions to meet your bookkeeping and tax compliance needs. For further information please contact us on 01444 458252 or firstname.lastname@example.org.