Many people do violate the rules. British culture is that

they have certain level of trust on their citizens not spying on everyone's every move, but when they do catch you the consequence can be very severe, especially for tax related offences. Personally I don't think it worth taking the risk given the amount involved here is really quite low. The best place to get info on this is through UK Company House or your local council where they provide advice on how to set up a business and where to get loans etc.