1. Register your business with HMRC as soon as you start to trade
Registering your business sounds more complicated than it is – these days, it is an easy process and can be done online via the HMRC website. You will need to be clear on which trading style is most suitable for your Network Marketing business. Options include sole traders, limited companies, partnerships or limited liability partnership. We recommend the sole trader option if you’re setting up a business on your own, or the partnership option if you are starting the business with someone else. Watch this video to find out more about trading styles.
2. Claim all expenses to which you are entitled
Depending on your trading style, you are entitled to claim for a wide range of business expenses. Businesses pay tax on their profits only and being able to claim for certain business-related expenses like petrol and office equipment will save you considerable amounts of money. You may even be able to claim for rent, mortgage interest or some of your household bills if you work from home. The HMRC have provided useful guidance on business expenses.
3. Keep your business receipts in an orderly fashion and a safe place
It is in your interest to ensure that you keep business related receipts in a safe and easily accessible place. Even after HMRC have approved your accounts, you are obliged to keep proof of receipts for a minimum of six years. We also recommend that you keep your receipts in chronological order, arranged by months and years, to save time in future.
4. Keep a business mileage log
If you use your own car for business purposes, the business mileage deduction is a great way to save money. Similar to point 3, the HMRC will want to see proof of your mileage claims, in a consistent and easily presented way. A simple Excel spreadsheet will suffice.
5. Make a note of products used for demonstration purposes
One of the benefits of running a Network Marketing business is that you can get tax relief on products that you use within your business for sample and demonstration purposes, so be sure to make a note of these.
6. Make a rough estimate of the value of stock at the end of your accounting year
Any stock that you have in hand at the end of the accounting period needs to be valued at cost price and deducted from the total purchases figure for the year.
7. Get your tax return done as early as possible
Every year, the deadline for filing your tax return is 31st January, don’t leave it until the last minute! Set yourselves reminders around November/December time to ensure you leave enough time. If your tax return is not received by 31st January, the HMRC will apply penalties. If you are not sure what a tax return involves give us a call and we can talk you through it.
8. If you are making profits, set aside money to pay tax on a regular basis
Congratulations, you are running a profitable business – but before you spend it all, err on the side of caution and set some money aside on a regular basis. That way, you can slowly build up your tax funds and not be left to panic.
9. Talk to an accountant who understands network marketing
We have been acting for network marketing clients for over 30 years and truly understand the industry. Our team are used to advising new business owners as well as more established distributors on all areas of tax compliance and accounting.
10. Encourage your downlines to follow your example
Lead by example! Tax doesn’t have to be a daunting prospect, although it may seem confusing for individuals starting out. Be a responsible leader, encourage conversations, provide assistance where you can, and share your experiences with new starters.
If you would like to talk to an accountant who truly understands the ins and outs of the network marketing industry, call us today on 01444 458252 or email us on network-marketing@prbmp.com.