One of the questions that gets asked frequently is whether when registering with HMRC it is OK to describe your business as something less obvious, and if you do does that limit the expenses you can claim against tax. Among the descriptions I have seen suggested are executive stress consultant, fitness coach, massage therapist, and escort. No doubt with a little imagination all sorts of other business descriptions could be conjured up.
There are a number of reasons why you might want to describe your business in a way that does not explicitly state what you do. Two that come to mind immediately are applying for a mortgage or a tenancy. In both cases you would probably prefer to produce a set of accounts or tax return which is more discreet about your business. And of course if you ever plan to become Mayor of London it looks like you will now have to publish your tax records.
Strictly your business description should accurately describe what you do. You certainly cannot claim to be something that by no stretch of the imagination describes what you do: so that rules out dentist, tree surgeon, plumber and author. In practice HMRC are unlikely to object to something that loosely encompasses escorting. They are more concerned to get you registered and paying tax. Indeed at one time their guidance advised tax inspectors to agree how income from prostitution should be described before they assessed it. That guidance may still be there but the relevant bit of the HMRC Enquiry Manual is not available to look at as it’s exempt from Freedom of Information. I cannot see any problem with any of the descriptions suggested above in the first paragraph.
One thing to watch is that if you register with a fairly broad description, like dancer or entertainer, you are likely to be asked to give more details. There are a lot of differences between the way in which ballet dancers are engaged and the type of expenses they incur, and the working habits of their pole dancing sisters. The easiest way to address this is to add some background information on your first tax return.
The second part of the question is whether the choice of business description limits the type of expenses you can claim for. For example if you tell HMRC you are a dancer does that mean you can claim for shoes and tights but not condoms or your website? The answer is that it does not matter what you call your business, it is the reality of how you earn your income that matters. The rule for expenses is that they are allowed if they are wholly and exclusively incurred in generating your business income. If the reality is that your income derives from bookings you get through your website, then the cost of your website is allowed. And similarly if your income is from escorting you don’t get tax relief for buying ballet shoes, no matter how your business is described.
One final thought. Suppose you have an existing business, say as a proof reader or a party planner, and you then start doing some escorting. Can you just treat your new activity as an extension of your existing business and put all the income and expenses through that? Strictly it is wrong, but as you will nearly always end up paying exactly the same amount of tax as if you had registered the two businesses separately it is not likely to get you into serious trouble. If HMRC find out you can justifiably say that no tax has been lost so there should be no penalties. Their main concern would be whether amalgamating two different businesses has disguised the fact that one is making profits and the other losses.