Category: Tax

Keep Calm and do your Tax Return NOW!

22/1/2018

If you are a self-employed artist living in the UK and earning income from your art, this is a little REMINDER that The deadline for paying tax for the 2016-17 tax year is 31 January 2018.

If you haven't yet started - or completed - your tax return then now is a good time to find that file with all your invoices and tax receipts and get stuck in!

That's because the fines for late filing of your tax return AND payment of any tax owing kick in after 31 January.

Estimate your penalty for Self Assessment tax returns more than 3 months late, and late payments.
HMRC

Plus you don't want to get caught up in the meltdown of submission which always seems to happen at the end of January when all those who left it to the last minute start to wail when it's difficult to log in to the system and file your tax return and pay any tax owing.

Or maybe HMRC have fixed that?

TOP 5 Tax FAQs

These are the TOP FIVE most frequent questions which get asked about tax this month

Do I need to fill in a tax return?

Check if you need to fill in a Self Assessment tax return

How do I know how much tax I owe?

NO NEED TO WORRY! When you fill in a tax return online, it automatically works out and displays how much tax and Class 4 National Insurance contributions you owe. It will also allow you to print your calculation.

How do I register to send my return online?

I’ve lost my User ID and password, what do I do?

Watch the HMRC YouTube tutorial below to find out:

When does my 2016/17 return need to be completed?

Your online Self Assessment tax return needs to be in by 31 January 2018, otherwise you will receive a £100 fine.

Which brings us back to where I started!

Tax Tips for Artists

If you need any more help, you can try looking at my page on Tax Tips for Artists . I can't promise it has the answer to every question but it will probably steer you in the right direction. (Please note I do NOT offer advice to individuals and information is offered without any liability.)

I'm going to be updating this page in the near future while preparing my Tax Tips for Artists talk on 5th March 2018 for The Heatherley School of Art in Chelsea - which is free to anybody who wants to come (but there is limited seating!)

Finally here are some of my past blog posts on the topic of tax

Ten Tax Tips for Artists - some of which are reminders for me! Plus some links to guidance on what to do and what not to do!
Ten More Tax Tips for Artists - Round about this time of year - just as I'm submitting my tax return to Her Majesty's Revenue & Customs, I write a blog post about tax - for artists.
Do Hobby Artists need to complete tax returns - reasons why people who are not full time professional artists living in the UK might need to complete a tax return.

You can also find more GENERIC help on the HMRC YouTube Channel.

Here's their Self Assessment Video about the weakest excuses and worst expenses they've had from taxpayers!

Subscribe to Art Business Info. for Artists - NEWS by Email
and receive every post via email.
(Your subscription is only activated after you verify the link in the email you will receive)

0 Comments

Want to set up an online art gallery with ecommerce?

28/4/2017

0 Comments

I got an email this morning asking questions about the tax aspects of setting up an online art gallery and ecommerce which involved artists and paying customers who might be located anywhere in the world

Below you can read:

the email I got and the "short sharp" response I sent below.
a checklist for anybody thinking about setting up an ecommerce facility to sell art

What are the tax implications of selling art online?

This is the email. I've numbered the questions to make them more accessible online in a blog post

Dear Katherine,

Firstly, I owe you my sincerest gratitude for all the information you have presented on this website. It has answered many questions I had and for that I am grateful.

I am on the verge of launching an e-commerce online gallery and I was hoping you could answer a few questions for me. This my first time dealing with anything to do with e-commerce and selling online so there is still a lot I don’t understand.

1) Some of the artists who I represent do not reside within the UK or the EU, and there is no guarantee that any paying customer would reside within the UK or EU either. How would this affect me regarding tax?

2) When this business takes off, I plan on becoming location independent. How will this affect my tax status as I won’t be living within the UK but my business will be registered in Britain?

3) How would it work when it comes to putting an address on my invoice if I’m only in the same location for a limited amount of time?

Thank you again,
Kind regards,

Mr Gallery Man ( a pseudonym)

It generated a very "to the point" response from me!

Dear Mr Gallery Man

If you are setting up a business you need professional (i.e. paid) tax advice from an expert to make sure that:
- you are aware of all your legal responsibilities tax wise
- where you live and where you operate are tax efficient given who you expect your customers to be
- you get to keep your house because the tax man doesn't come looking for the tax that you have avoided - with penalties and a possible prison sentence
This is serious. You need proper advice. That's not going to come from me.

The next point I'd make is that I have seen any number of people have the bright idea of setting up an online art gallery operating through ecommerce in the last 10 years. I'd say round about 95-99% of them no longer exist.

I think you need to do more research about the marketplace and what sort of investment you need to make in time and effort - and contacts / social media following - to make it work.

My one piece of advice for you is if you have never run a business before and if you have never been involved in the art market before, run away fast before you waste an awful lot of money for no return.

Regards

CHECKLIST:
How not to get stung when setting up ecommerce!

Do thorough research first. You should never be starting any business where you don't fully understand the full implications. Those that do go out of business very fast. How anybody could be contemplating starting an ecommerce business without what understanding what they are getting into is beyond me!
Get professional tax advice if you plan to set up a business. You're an amateur. You haven't got a clue what you don't know about tax. Tax experts exist for a reason. Paying for tax advice is a legitimate business expense which is deductible against tax - so long and only if it is related to the business and not your personal income. If you can't afford the tax advice you definitely can't afford to set up in business involving ecommerce.
Understand the competition - you need to research and understand the business model adopted by your competitors. Those who are still in business after few years either know what they're doing, have good advisers, are prepared to keep going even if they're not making much money - and/ir the tax man has not yet caught up with them. Take a look at how where they are located and how they deal with local taxes on transactions for people living in different countries. Don't assume that what they are doing is correct, however it gives you a basis for an intelligent discussion with a tax expert!
There is no escaping tax liability - make sure you don't get landed with an enormous tax bill! - Governments have woken up to the fact that they are losing out massively on tax revenues through the amount of business which is now transacted online. Tax authorities are now paying a lot more attention to online businesses. You should assume that anything you are doing which evades payment of tax (whether deliberate or inadvertent) will result in a tax bill plus penalties plus a possible prison sentence. They are getting very serious about this.
Understand the differences in tax treatment of private sales vs sales via art dealers and galleries. What quite a few people don't understand is that private sales - between an sole trader artist and a paying customer are very different from sales via third parties. There's also a difference between a third party which hosts a site that enables artists to make contact with paying customers and those where the artist is represented by a gallery and sells art via the dealer/gallery online. The differences largely relate to thresholds for payments of additional taxes; liability for additional taxes unrelated to thresholds and whether they way the ecommerce is configured is deemed to be an evasion of tax.
Understand why Tax gets much more complicated when transactions are online. You have to make sure you observe the tax regime for where you live, where your business is located - and also where your paying customer lives. For example, with respect to the pursuit of lost income from tax on online transactions for digital services, the EU changed the treatment for all digital transactions in 2015. Now VAT is payable based on the place where the customer lives NOT where the artist or the business is located - and there is no minimum threshold for registration in another country (a total nightmare!). They're also not at all keen on people trying to get round this by saying they won't do business with anybody outside the country where they live - and were threatening penalties for this last time I read up on this!

EU VAT rule change
From 1 January 2015, the rules around the European Union (EU) VAT place of supply of services will change. This will affect the sales of digital services (broadcasting, telecommunications and e-services) from a business to a consumer (private individuals and non-business entities for example, public authorities or charitable bodies). The place of taxation will be determined by the location of the consumer.
VAT: businesses supplying digital services to private consumers

Bottom line, if you are

operating as a sole trader as an artist or art tutor involving ecommerce
or you are hosting an online gallery with ecommerce facilities for selling art for artists you represent and/or other artists,

you need to be very careful that you have sought professional advice and checked out all relevant tax aspects for your particular set-up - which you have explained very clearly to your tax adviser. (NB Only telling them what you think is relevant isn't a helpful approach since you don't know what you don' know!)

Just because somebody says they operate in a particular way doesn't make that right or legal - unless they can produce the letter from their tax advisors explaining what they can and cannot do!

BTW I'm NOT a professional tax expert. You should make sure you also read the note below about what this site does not do.

You can learn a lot from authoritative tax sites online - but they don't have all the answers!

More information about tax and vat for artists

You can read more information on this website on the following pages in the Money and Tax section

Tax Tips for Artists
VAT for Artists

The information I collect, collate and organise on this website largely relates to information accessible to anybody from authoritative sites - either formal government tax authorities or professional tax advisers. Plus some common sense advice from me about how to organise your tax affairs.

What this site does not do

This site does NOT provide:

Definitive answers on all matters relating to tax records for where you live.
"Professional advice" available from somebody with a tax qualification and current expertise of tax affairs anywhere in the world.

I recommend that you pay a professional for tax advice IF:

your tax affairs are complicated
you have a specific tax query which you can't find an answer to from official information available online.

0 Comments

Income Tax: The nine badges of trade

29/1/2017

0 Comments

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.

0 Comments

Free Self-employment Webinars by HMRC

23/9/2016

0 Comments

Are you new to self-employment as an artist?

Are you still finding your feet in relation to what's required for tax and business expenses?

If you are, there's an opportunity for you to sign up for FREE self-employment webinars by HMRC. These are

next week - on the 27th, 29th and 30th of September
deal with the basics you must get on top of if you are a self-employed artist.
NOT going to be designed specifically for artists but you will be getting OFFICIAL advice from those who will be vetting your tax returns!

The front door of HM Revenue & Customs at 100 Parliament Street

You’ll also get the chance to ask specific questions in the webinar and you don’t need a webcam or microphone to use this service.

My guess is the webinars are probably also suitable for more experienced people who want to check out they're doing the right thing! Or maybe just a refresher to remind you of anything you might have forgotten!

Record keeping for the self-employed - 27 September 2016 15:00 to 16:00
How to set up a record keeping system and what to record.
Find out about

basic principles of good record keeping
what HMRC expects of records created by sole traders and partnerships
digital record keeping apps
how long you must keep your records.

Register now

Business expenses for the self-employed - 29 September 2016 11:00 to 12:00
This webinar covers

what business expenses are
a quick guide as to what commonly is and isn't allowable
help on how to work out your motoring costs
help on expenses of using your own home
what simplified expenses are and why they can save you time

Register now

Capital Allowances for the self-employed - 30 September 2016 9:00 to 10:00
Find out

how to claim Capital Allowances when you buy large items of equipment for your business. (for self-employed businesses who use the traditional 'income and expenses' method of accounting)
how to claim Capital Allowances for cars - for self-employed businesses using the traditional method of accounting and the Cash Basis method of accounting.
Includes the different types of Capital Allowances available and some practical examples.

Register now

You can also follow the HMRC Twitter feed for HMRC Business Help @HMRCbusiness

0 Comments

How to keep on the right side of the tax man

10/9/2016

1 Comment

Top of my article about artists' business expenses and tax in 'The Artist' September 2016

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:

Starting out - what you need to do when you start to trade and sell art
Tax Returns - the forms you need to complete
Help yourself - why you may not need an accountant
Be organised - ways to keep on top of the paperwork
Account efficiently - simple ways to keep your accounting simple
Allowable expenses - what you can claim
Cash-based expenses - a checklist for those accounting on a cash basis
Flat rate expenses - HMRC approved rates which make life even simpler!
Cash expenses not allowed - what you can't claim
Losses - pointers to the guidance on losses
If you are successful - how accounting and tax changes (in brief) as you generate more income

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.

1 Comment

<<Previous

Forward>>

Art Business Info: NEWS

Keep Calm and do your Tax Return NOW!

TOP 5 Tax FAQs

Tax Tips for Artists

Want to set up an online art gallery with ecommerce?

What are the tax implications of selling art online?

CHECKLIST:
How not to get stung when setting up ecommerce!

More information about tax and vat for artists

What this site does not do

Income Tax: The nine badges of trade

The nine badges of 'trade'

Free Self-employment Webinars by HMRC

How to keep on the right side of the tax man

Art Business Info. News for Artists

Visitors so far

GET Art Business Info. NEWS by Email

Author

Archives

Categories

Art Business Info: NEWS

Keep Calm and do your Tax Return NOW!

TOP 5 Tax FAQs

Tax Tips for Artists

Want to set up an online art gallery with ecommerce?

What are the tax implications of selling art online?​

CHECKLIST: ​How not to get stung when setting up ecommerce!​

More information about tax and vat for artists​

What this site does not do

Income Tax: The nine badges of trade

The nine badges of 'trade'

Free Self-employment Webinars by HMRC

How to keep on the right side of the tax man

Art Business Info. News for Artists

Visitors so far

GET Art Business Info. NEWS by Email

Author

Archives

Categories

What are the tax implications of selling art online?

CHECKLIST:
How not to get stung when setting up ecommerce!

More information about tax and vat for artists