Hi there, I have a small project (Web radio) that will require a 10MBPS Server and im a UK resident.
I want it to be self sufficient so I want to sell hosting in order to fund the server.
Unfortunately Im rather confused as to the legalities of what I want to do:
Does a business have to be formed and then registered in order to sell webhosting over the internet?
Can a individual such as me sell webhosting without declaring to the tax providing I am not over my personal allowance or is there any form of allowance for businesses before they have to start paying taxes?
Basically I just need to sell hosting to fund my project - Im more than capable of both but just wanted to clarify the legal position of such a move before attempting anything.
Well you would be a sole trader which means you would do a self assesment form in the UK, you should register with the inland revenue to tell them you are a sole trader and do your books. If you don't go over your personal tax allowance you wont pay tax but you should register just to be legit.
If you decide against letting them know then make sure you keep books / accounts so that if they ever find out you can prove to them that you have not gone over your tax allowance - obviously i recommend letting the inland revenue know you are a sole trader
All you need to do is let the Inland Revenue know that you're acting as a sole trader within 3 months of starting up the business.
You don't have to form a company with Companies House either, although if your hosting business grows beyond just a small host it may be a good idea to do this, especially for the aspect of limited liability.
When you're registered and acting as a sole trader, any debt that you accumulate will be in your name (I'm not saying that you will get into debt, just that this is one of the downsides of being a sole trader).
If you have a source of income coming in then you need to declare this to the inland revenue. It sounds to me like you just need to spend a small amount of money speaking to an accountant. You do not need to set up a limited company, but you should also look at your liabilities with what you're doing. If you are hosting sites for people are you offering any guarantees? There is always a slight potential that someone might come after you for financial compensation if their site is down for any length of time or you do something that causes an issue for them and you need to therefore assess if you have adequate insurance and if you are protected enough. Chances of this are VERY slim, but when i was a sole trader 10 years ago we had an instance when some floppy disks we duplicated had a virus on them (ultimately turned out that it was a false positive reading) and the client immediately sent us a solicitors letter saying that we would be responsible for any losses incurred.
I think, as others have said above, that it would be wise for you to seek some free or low cost advice. Business Link is definitely a good place to start, although your mileage may vary depending upon where you're based, and most accountants would be able to advise you for a low fee on this one