I've started providing services as my side occupation (I have full-time employment), and before I registered my limited company and got my bank account sorted, I was paid by two of my customers. I invoiced them, and they paid me as an individual. However, two weeks after that, I finally formed my limited company. My questions are as follows: 1. Can I (or should I) declare those invoices under my company name and transfer payment from my personal account into my business account?
2. Do I leave those as they are (i.e., as they were paid to an individual) and then pay income tax?
My issue is, I'm in a higher rate tax bracket from my main job (I pay 40% on any amount I earn now), thus paying 40% from earned amount is something ideally I would like to avoid and instead, if I could declare it for tax purposes as company income, I'm happy to pay all related taxes but as a business.
Arthur Weller replies:
Logic suggests that a company cannot receive income before it exists. But see the case Hepburn v HMRC (www.bailii.org/uk/cases/UKFTT/TC/2013/TC02837.html), where an individual successfully argued that 'her' income was really the income of a yet to exist company. Possibly, you could do the same. But you would need to carefully examine the facts of the case, to see whether they differed significantly from yours.