Income tax guide for self-employed professionals in UK – Part 2
- Where should I begin?
British law requires from every professional intending to start practicing for the first time to make a declaration to the Income Tax Department, depending on the place of practice.
Otherwise, she/he may risk being considered “undisclosed” and thus liable to legal fines. When should the notification be submitted? Within two months from the date of affiliation to a syndicate/order, for professionals required to be affiliated to a syndicate/order, or within two months from the commencement of work (for those not required to be affiliated to a syndicate/order).
When does the two-month period start?
The period starts from either:
- The date of affiliation or issue of a license, for those required to be affiliated to a syndicate, or
- The date of the first job generating a taxable income, or
- The date of issue of any document which demonstrates the generation of income from a profession, or
- The date of rental, use or purchase of the work location, or
- The date of engaging any employee at the work location, or
- The date of subscription , the Water Authority or the
In case several of the above criteria are present, the criterion carries if the oldest date shall be apply.
Where the notification should be submitted?
It should be submitted to the Income Tax Department in Beirut or to the concerned unit.
3- What are the proper records?
The self-employed (liberal) professional is required by law to keep two accounting books:
Income/ Expenditure Journal – Receipts and payments are recorded daily on a chronological basis.
Fixed Assets Register – Used to account for furniture, equipment, goodwill, etc. The value of these assets is recorded atcost price.
Why should these records be kept?
- To determinate the annual income
- To determinate all profession-related costs incurred by the taxpayer
- To facilitate the verification process of the Tax Administration.
- Keeping proper records is necessary. It is a mandatory process to ensure that the taxpayer records all sources of income and expenses according to statutory procedures, without the possibility of changing these records or manipulating entries to prevent tax evasion.
Practical Example (2)
Nada is an accountant who submitted her commencement of work declaration to the Finance Administration in Nabataea but she hasn’t started working yet. Nada is, therefore, exempt from the obligation to keep the above two records until she commences work.
Salim is an interior decorator who uses computer paper rather than regular records to record his accounts. This procedure becomes legal once these papers are authenticated (numbered, stamped and signed) by a Notary Public.
Where can I obtain these records from?
From designated bookstores.
How do these records become legal?
These records become legal when a Notary Public, located in the same area as the taxpayer’s work location, numbers and stamps every page of both these accounting books and marks each one – by signing and dating her/his endorsements – prior to the date of making the first entry (the first recorded accounting operation) in either of these two books.
How can I organize my accounting records in a proper and systematic way?
Entries should be recorded clearly and the accounting method adopted should allow easy verification of the authenticity of the recorded entries (known as accountancy entries) and avoid any ambiguity.
- Daily operations must be recorded in the daily journal chronologically.
- Each recorded operation (entry) must be supported by a document (invoice or receipt) that confirms the origin and the content of the entry.
Records and documents that prove the authenticity of entries and declarations should be kept in file for a period of five years from the date of the said tax year (for example, records and documents relevant to the 2000 tax year should not be destroyed before the end of 2006).
Practical Example (3): Patients’ privacy
Zeina is a doctor who wishes to maintain her patients’ privacy. She addressed an inquiry to the Taxpayers Service Unit which advised her that it would be sufficient for her to record the details of the amounts she receives for her medical services, and the date of such receipts, without mentioning the patient’s name or nature of illness (provided that all necessary documents are available to confirm the receipt of funds).
What happens if I fail to keep records according to the regulations?
1- In case endorsement date is subsequent to the date of the first entry in the books.
2- Or in case one or both books are not endorsed by a Notary Public.
In the above two cases, the records shall be considered in vibration of the applicable regulations and the taxpayer shall be fined 10% of the value of the tax due provided that this is not less than L.L.100,000.00.
3- In case the books are incomplete according to the regulations, i.e. the records do not contain full details of all entries.
4- Or in case where the accounting books are not available (either one of the books or both).
In the above two cases, the taxpayer shall be liable to the cancellation of his accounting records and the administration will then assess his profits directly (2) and the taxpayer shall be fined an amount equal to the tax due, provided this is not less than L.L.100,000.00.
Accounting entries should be recorded in ink.
Scratching, filling, erasing, overwriting (writing over the same entry) and using Typex is prohibited.
Errors may be corrected provided that:
- Corrections are made in a visible manner, and written in both numbers and letters, using ink of a color different from that used in the original entry.
- The date of making the correction and the signature of the person who made the correction should be shown below the corrected entry according to the same procedure followed in correcting official documents or bank checks.
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