In the UK Income tax is charged on “the profits of a trade, profession or vocation”.
You are assessed as trading and therefore must do a tax return if you exhibit one of the nine badges of trade. But do you know what these are? See the box below for an explanation.
First you need to note that a lot of tax law focuses on "the asset”. However there isn’t a lot of tax case law relating to artists - so what follows is my interpretation.
Please note that I’m NOT a tax accountant and if you need professional advice you should pay a professional!
For what it's worth, in the case of an artist I read “ the asset” as meaning either your stock of equipment and materials used to generate sales (which has a balance sheet value); or your stock of artwork (which has a balance sheet value) which is exhibited and sold over time via exhibitions, online, art fairs or wherever to generate an income.
The nine badges of 'trade'
One of the reasons why HMRC wants to know whether or not you are trading is because it needs to know what sort of tax to apply to your income.
For example, money you receive can be a taxable receipt that can arise in a number of ways. These are:
Below are the Nine Badges of Trade which HMRC have declared to be indications of trade - and my interpretation of how these apply to artists.
Please also remember that at the end of the day what matters is if you generated trading income or intended to trade - NOT how much profit you've made.
The Vanity Gallery is a new page on my website.
I've extracted all the information relating to Vanity Galleries from my Alternative Options for Exhibitions page and created a page which is entirely focused on the characteristics and risks associated with Vanity Galleries.
Lots of artists sell art from home. It's a business model that can work well for many artists. BUT you do need to be aware of the legal and other implications of selling from home.
Artsy published an article on 4th January about How to Start a Gallery in Your Apartment. This article by Casey Lesser
Unfortunately the article tends to focus only on the social and artistic considerations and wholly omits to mention critical factors which should ALWAYS be taken into consideration before you open a gallery in your spare bedroom - or your living room and a bedroom as Leo Castelli did.
Hence this blog post. I would urge all those thinking of widening their options for selling art in 2017 to read on before they potentially create a lot of problems for themselves.
It's not that you can't do it - but rather than it's rather more complicated than this "how to" article suggests it might be.
So here are the factors it omits to mention - but if YOU ignore them you could find yourself landed with some very expensive repercussions!
My page on Selling Art from Home provides you with a whole page of things you need to think about and resolve before you sell art from home
There is no mention in the Artsy article of:
Do please read this page before being seduced into thinking it's really quite simple and straightforward from a legal and financial perspective to open a gallery at home.
My article in the September edition of The Artist magazine (in the UK) is all about how to Be business-like with expenses and tax.
It contains lots of brief tips about how to make your tax affairs easier to manage and avoid problems with the Inland Revenue. Headings include:
The tips are all one side of A4 making them very easy to file!
This edition is still on sale in all good newsagents in the UK but is also available as a back issue and is also available online as a digital subscription.
For those using Paypal as a method for customers to pay for your art...
Have you read the Policy UpDate published this month by PayPal? If not you might like to take time out to do so. There are two important paragraphs
The first relates to their use of the intellectual property of your business i.e. their use of your brands and logos. It applies to relates to all businesses (e.g. your art business) which use PayPal. I'm guessing that they want this right to use brandnames and logos for marketing purposes.
The new paragraph at section 1.3 reads as follows: “You grant the PayPal Group the worldwide right to use and depict your business name, trademarks and logos on our website and in our mobile and web applications for the purpose of displaying information about your business and its products and services.”
The second is a requirement that you neither disparage PayPal nor use surcharges in excess of those relating to other forms of payment.
Note in particular the last sentences of the second and last paragraphs - which I've highlighted in bold! I can only think there has been a legal case which now means they need to highlight that they're not going to be liable for anything which is a criminal offence!
The issue for you is do you know how to avoid committing a criminal offence?
2. Non discouragement
There are also several amendments to the several amendments to the PayPal Buyer Protection policy
You can download PDF version of the Policy Update.
About Business News for Artists
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Katherine Tyrrell writes about art, artists and the art business and has followers all over the world. She also delivers workshops for art organisations and reviews websites and career strategies for artists.
Art Business Blogs
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