Tag Archives: registration

HMRC Campaign Targets Direct Sellers

HMRC Target Direct SellersHM Revenue and Customs have periodic crackdowns on different industries who they believe may not be paying enough tax. Recently they have focussed on eBay sellers, electricians and hair dressers. Their newest target is on ‘direct sellers’. HMRC define direct selling as “when you sell directly to customers usually door to door or in customers’ homes or the workplace”. They go onto say that:

Your selling may involve demonstrating a product in a customers’ home, sometimes at a party, or you might sell door to door, using catalogues. You might only sell to your friends and relatives. As a direct seller you will usually take commission on the sales you make. You may be involved in direct selling as a full time business, to top up your income from another job or to fit around your caring commitments.

HMRC’s concern is because people are often doing this kind of selling on top of existing jobs, or view it as an easy way to earn a bit of extra money, they may not realise they have tax liabilities. This can be further complicated by the way that they are employed. Although they may be described as an agent, representative, distributor or consultant for a particular company they are usually actually self employed. As such they need to be registered with HMRC in the same way as a normal sole trader business would. They should potentially be making regular National Insurance and Tax contributions and be filling out self assessment tax returns at the end of the year. Because of the terminology used and the complexity of contracts it can sometimes be unclear whether a direct seller should consider themselves as self employed or as employed by the company they are contracted to. HMRC have made a video to help people work this out.

If you are a direct seller who is self employed and you have not been making the correct tax contributions then HMRC are giving you until 28th February 2013 to come clean. If you do own up within this time period then they may wave any penalties and allow you to pay what you owe in instalments. They are only making this offer to people who have been working as direct sellers since before 6th April 2011 though. Anyone who started work after this point has to register and pay tax as normal.

If you think that the HMRC Direct Seller scheme may apply to you then you can download a Disclosure Form from their website. If you are a direct seller and want to get registered then we offer free Sole Trader Registration which includes basic accountancy advice so you can get your tax affairs in order.

Similar Domain Names: How to Avoid Breaking the Rules

Domain Name Rules We frequently hear of cases where a start-up company has bought a domain name only to find that a very similar name is already in use. The start-ups usually want to know if they can get away with using their new domain name. As with a lot of issues around intellectual property this is a bit of a grey area that depends on the exact circumstances. One thing that applies to all domain names though, is that just because you have registered a name does not mean you have the right to use it.

Passing off

If you have bought a domain name and then find out someone else has a very similar name already registered you need to stop and do some research. There is a long established legal principle in the UK called “passing off”. Originally this applied to business names and trademarks but a series of court cases over the last twenty years have extended its use to domain names.

Passing off is the principle that business names are protected, even if they are not registered.  So people cannot copy your business name, nor can they set up a business with a similar name if customers might be confused. To determine if passing off applies courts will normally look at whether one of the companies was already well established at the time of the conflict, whether the two businesses are operating in the same industry, in the same geographical area and targeting the same customers. As this is based on case law the exact ruling will vary based on the circumstances so, for instance, in one case the geographical area might not be relevant. In another case the colour of shop signs might be crucial. The basic principle is though, if a potential customer could easily confuse the businesses, the newer of the two will have to change its name. (To test this out the court might use the “moron in a hurry” standard).

Basically the same rules apply to domain names. If you have a domain name very similar to that owned by another business then you can be challenged for passing off. As with normal business names this will depend on whether you are in the same industry, whether you are in the same geographical area and whether customers are likely to be confused or misled. If you are judged to be “passing off” your business then you can be forced to change the domain name. This can potentially be a very expensive and disruptive process for web based businesses.

Protecting yourself from passing off

If you have accidently registered a domain name where there is a danger of a passing off challenge then you need to seek some specialist legal advice from an intellectual property specialist. The potential court case and impact on your business could be huge and needs to be avoided. If you cannot afford this kind of legal advice then a good first step to resolving the situation would be to get in touch with the other company and see whether they are going to be upset by your domain name. Of course the best way to avoid passing off claims is to do your research before you register a domain.

When you do a domain name search the results you see will be for the exact words or phrase you have typed in. It will not show you similar names. It is therefore a good idea to do a normal web search on your preferred domain name before buying it. When you do this make sure you go past the first page of results and have a really good look at different combinations of the words in your domain to re-assure yourself there are no competitors out there. Also make sure that when you buy a domain name you get all the different TLD combinations such as .com, .org, .net. This makes sure both that no-one else has an existing site with them, and that no-one can set up such a site in the future. You should also consider doing a company name search and a trademark search. This will ensure that no-one else has already established legal protection on the words in your domain name. If this is done properly then you should have no “passing off” problems.

What is a trade mark?

Trade marks are part of your intellectual property. Intellectual Property is a way of identifying who owns an idea. If an idea is covered by Intellectual Property then it is protected. Anyone who wants to make money from that idea has to ask permission and may have to pay. Not all ideas can be covered by Intellectual Property. To start with they have to be shown to be unique and original. In the UK there are 4 types of intellectual property which are

  • Patents – Have to be applied for and cover new inventions
  • Design – Can be applied for but there are some automatic rights, covers the way things look
  • Copyright – An automatic right covering anything written, includes books, music and websites
  • Trade Marks – Covers brands, names and logos. Has to be applied for

Trade marks can be applied to most companies. As they cover words and logos they can be used to protect company names, product names and logo designs or both. This is to stop people from setting up copycat companies or products which try to imitate yours and steal your customers. Trade marks are particularly important for UK companies as they are the best way to secure a company name. Trade mark rights are stronger and easier to enforce than standard company name rules. So even if you have registered a company name with Companies House you can still be stopped from using it if someone has a similar name trade marked.

Getting a trade mark search done before naming your company and then seeking trade mark protection is, therefore, essential. However the rules around what can and cannot be trade marked are complicated somewhat by trade mark classes. Trade marks in the UK are looked after by the Intellectual Property Office (IPO). The IPO break trade marks down into 45 separate classes. It is possible to have a company or product name registered in one class and an identical company or product name registered by someone else in a separate class. A classic example is that ‘Polo’ the mint does not clash with ‘Polo’ the car because they are in different trade mark classes. The basic principle is that no-one is likely to confuse the two objects, a mint and a car, therefore it is OK for them to share a name.

Currently all UK trade mark applications are kept by the IPO. They are valid for 10 years and then have to be renewed. The IPO also hold details and reciprocal relationships with the European Union and countries who are signed up to the Madrid Protocol. This means that you can easily get protection for your brand on an international level.

If you would like assistance with a trade mark search or are considering a trade mark registration then our legal team can help you.

Why your business should not wait to register for VAT

Registering for VAT means that you become an unpaid tax collector on behalf of Her Majesty’s Revenue and Customs (HMRC). Once registered you have to give 20% of the price of any VATable goods or services you sell direct to the government. If you don’t register you get to keep this 20%. So why would anyone bother?

Well the first and most important reason people register is that once you reach the VAT threshold you have to. Currently the threshold is £77,000 of turnover on VATable goods and services in a year. Failure to register at this point means that once HMRC catch you, they will still make you pay the VAT but will also levy a penalty charge on top. This is normally a percentage of the VAT due. The current penalty is a premium on top of your VAT of between 5% and 15% depending on how late you are.

So your business is going to have to register for VAT at some point. You don’t have to wait until you reach the threshold though. You can do a voluntary VAT registration at any point. Many people choose to do this as soon as they start their business. There are a few reasons for this. The main ones are:

  • Being registered for VAT is the norm. All decent size companies have to be VAT registered so if you are not it makes people nervous.
  • As well as paying VAT, you can reclaim VAT if you are registered. So basically you can claim back 20% of anything you buy for your company.
  • Registering for VAT when you are already trading makes the process much more difficult.

The last one of these reasons is perhaps the most important, and most overlooked. To understand why registering while trading can be such an issue you just have to take a look at the official HMRC advice. HMRC say that as soon as you make the application to become VAT registered you have to start paying VAT but you aren’t allowed to charge it on invoices (or reclaim it on payments). Their solution is as follows:

you should increase your prices by an amount equivalent to the VAT rate relevant for your goods or services, and explain to your customers why you are doing so.

Once you receive your VAT registration number you can then reissue those invoices, amended to show your VAT registration number and the VAT charged. This will ensure that your VAT-registered customers may reclaim the VAT that they have paid.

So basically if you try to register for VAT while you are already trading the recommended way to do it is to put all of your prices up by 20%. HMRC currently quote a month for the VAT registration process to take place. Once this month is up you would then have to re-issue invoices for all the sales you have done showing your new high price less the VAT. If you are dealing with business customers who are VAT registered this won’t bother them too much as they will be able to claim back the VAT and will end up paying the same as they always have. However for ordinary retail customers, or non VAT registered businesses, you will effectively be giving them a 20% price rise.

It isn’t hard to imagine the effect that a sudden 20% price hike, and having to redo all of your sales invoices for a month, will have on a new business. As well as potentially hitting overall sales the extra paperwork could be a significant burden. Registering for VAT from the start of you business means that you can maintain your prices at a constant level and avoid the disruption of the registration paperwork.

If you would like to register for VAT you can do it yourself through HMRC or we can do your VAT registration for you.