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Income Tax: The nine badges of trade

29/1/2017

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:

self-employment income subject to income tax and class 2 and 4 National Insurance contributions (NICs);
capital subject to capital gains treatment;
some form of investment income, taxation depends on the taxable status of the individual or organisation that received it

Or it might be a non-taxable receipt.

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.

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Be smart about Vanity Art Galleries

15/1/2017

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The Vanity Gallery is a new page on my website.

Take a look If you'd like to know which artists vanity galleries tend to target and how they operate.
Plus how to be smart if one of them contacts you or you need to check a gallery out.

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.

It covers:

What is a Vanity Gallery? Plus reasons to avoid them.
What's NOT a Vanity Gallery - legitimate options where artists 'pay to display'
How to recognise a Vanity Gallery
PLUS How You can be Smart about Vanity Art Galleries - Checklists of questions to ask covering Target audience, marketing, gallery artists and exhibitions, financials and paperwork - including consignment contracts.

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How to start a gallery in your apartment - NOT!

8/1/2017

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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.
Selling art from home

Artsy published an article on 4th January about How to Start a Gallery in Your Apartment. This article by Casey Lesser

makes the case for the apartment based gallery
interviews people who have apartment galleries in five different cities
asks what does it take to start a gallery.

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.

How to sell art from home - the nice cuddley version (published in Artsy on 4th January 2016)

So here are the factors it omits to mention - but if YOU ignore them you could find yourself landed with some very expensive repercussions!

How to sell art from home - the practical, hard-nosed and business-oriented version

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:

whether your legal title to your property allows you to do this. Do you want to forfeit your lease?
whether your mortgagor allows commercial retail activity from a domestic home - the rates for commercial mortgages are completely different to those for domestic mortgages
insurance requirements for your liability for the health and safety of third parties on your property - omit this at your peril!
planning permission - for treating a domestic property as a commercial entity (working from home is very, very different to inviting people in to your home to sell art)
the impact on taxation on your property. In some places the way capital gains are taxed is very different if it involves part of the property being used for commercial activities.

and that's just the beginning! There's a lot more on my - but hopefully you'll find the explanations short and helpful.

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.

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Art Business Info: NEWS

Income Tax: The nine badges of trade

The nine badges of 'trade'

Be smart about Vanity Art Galleries

How to start a gallery in your apartment - NOT!

Art Business Info. News for Artists

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