Category: VAT For Artists

UK: Making Tax Digital - update (July 2020)

24/7/2020

IF - in addition to employment income you earn - you earn (or aim to earn) more than £10,000 per annum from your self-employment you need to be aware that "Making Tax Digital" (MTD) is becoming MANDATORY for

all unincorporated businesses (that includes sole traders) and
landlords
with TOTAL business or property income above £10,000 per year
as from April 2023.

Basically this means any artist or art organisation that aims to earn a living or significant income - 0f £10k p.a. or more - other than from being employed by others will need to comply with the requirements of MTD.

DO NOT DELAY checking out what this means!!

What you need to know

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- more effective
- more efficient
- easier for taxpayers to get their tax right
Overview of Making Tax Digital (update July 2020)

The extension of scope of Making Tax Digital relevant to other groups was originally deferred after representations following initial announcement of HMRC's intentions - to make sure the system worked before it was rolled out to smaller businesses.

KEY POINTS AND TIMELINES as at July 2020
as per the Overview of Making Tax Digital.

Key points are:

Making Tax Digital (MTD) is already mandatory for all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been required to follow the Making Tax Digital rules since April 2019 by
- keeping their records digitally (for VAT purposes only)
- provide their VAT return information to HMRC through Making Tax Digital compatible software
- i.e. If you’re a VAT registered business with a taxable turnover above £85,000 you should be keeping digital records NOW.
- HMRC have published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.
- see also Keep digital records for Making Tax Digital for VAT
MTD for VAT became mandatory from 1 October 2019 for businesses that fall into any of the following categories:
- trusts;
- not for profit organisations that are not set up as a company;
- VAT divisions;
- VAT groups;
- public sector entities required to provide additional information on their VAT return (such as Government departments and NHS Trusts)
- local authorities;
- public corporations;
- traders based overseas;
- those required to make payments on account; and
- annual accounting scheme users.
From 1 April 2022 all VAT registered businesses MUST follow these rules regardless of turnover.
From 6 April 2023, Income Tax Self Assessment (ITSA) for all unincorporated businesses and landlords with total business or property income above £10,000 per year - becomes mandatory from their next accounting period starting on or after 6 April 2023.
If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.

REFERENCE
Besides references to paperwork in the HMRC website above,

Making Tax Digital | Association of Accounting Technicians (who tend to do a lot of tax work) - a useful simple summary
Making Tax Digital | Accounting Web - also have a useful series of articles
Find software for Making Tax Digital for VAT | HMRC

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VAT for Artists UPDATE #1/2019

3/3/2019

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My VAT for Artists page on Art Business Info for Artists has just had a fairly major overhaul

Major update - art education and digital services

The following two sections:

VAT on Art Education - eligible bodies and business activities - I'd be interested to hear from all art schools which do not qualify as eligible bodies.
VAT on Digital Services - required reading for anybody who is supplying anything for sale which is a digital supply.

Some may be surprised by what is - and is not - deemed a digital service i.e. vattable (Source: VAT rules for supplies of digital services to consumers in the EU)

Unless you sell digital services entirely through digital platforms or marketplaces, who take on responsibility for accounting for the VAT due, you must consider how you intend to account for VAT on supplies of digital services to consumers.
VAT rules for supplies of digital services to consumers in the EU

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Two new sections re. turnover and art societies

PLUS I've created two new sections relating to:

Calculate VAT Taxable Turnover - those who indulge in barter would be well-advised to pay attention to this!
VAT on Art Societies ("Clubs and Associations") - which needs more work. I'd like to hear from art societies who have sought and received expert advice on how they account for or claim exemption from VAT.

Nothing is particularly related to recent changes so much as the needed to be reviewed and needing to review and update for changes which have been made by HMRC - and to fill some gaps in the information.

I'll be going back and will do some more updating - after my brain stops hurting!

If any any art tutors, suppliers of digital art supplies/tuition and art societies have any comments / queries please comment below - but I cannot guarantee I can assist. ALSO please do follow the official guidance links supplied first.

IMPORTANT DISCLAIMER
Those who need to know about VAT need to start somewhere.....

None of the information on the VAT for Artists page is definitive, comprehensive or complete.
None of the advice on the page should be treated as professional.
Information and advice may also be out of date.

That's because it's absolutely impossible to keep up with all the changes unless you are a qualified professional practitioner who is doing VAT full-time and there's no way I'm going to do that!
However I do reference relevant government and EU guidance where I can - and official guidance is always a good place to start when checking any aspect of VAT. It also helps frame specific questions to professionals which can reduce fees due for advice requested and given.
This page also references advice and guidance from one firm which does appear to know what it is talking about in relation to the EU regime in different countries and cross border sales- and I have found few equivalents. I'm not averse to hearing about more!

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Tax Tips for Artists - a talk at Heatherley School of Art

20/2/2018

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I'll be giving a talk on Tax Tips for Artists on 5th March 2018 at 4.30pm, in my capacity of Visiting Lecturer at The Heatherley School of Art,

The talk is FREE but my talks tend to get a lot of students and artists attending so it very much works on the basis of first there gets a seat!

The talk is for all those who want to get on top of their tax affairs before any omissions or errors catch up with them!

why - and when - you need to register for tax
why being a hobby artist is different from an artist who MUST do a business tax return
the difference between a personal tax return and a business tax return
timescales for getting on top of your tax
records you need to keep
what you need to declare
what you can and can't claim as expenses and allowances against tax
how to pay your tax
one thing you MUST know about VAT!

This page tells you where Heatherley's is and how to get to it by car and public transport.

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Want to set up an online art gallery with ecommerce?

28/4/2017

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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.

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VAT for Artists

19/6/2016

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Do you know

how VAT applies to artists and
when it ought to be applied to your business activities as an artist or art teacher or exhibition organiser or gallery owner?

Last week I wrote an article for 'The Artist' Magazine about VAT on art and for artists - which should be published in the October edition.

Trying to work out how to make sense of VAT for artists on one side of A4 paper was a bit of a challenge. It wasn't an easy article to write and it went through several drafts.!

One of the official VAT Notices which the page links to

Last week and this weekend I've taken the opportunity to overhaul and update my webpage about VAT for Artists on this website.

Interestingly it's become one of the most visited pages on this website since it was first published last year. When I developed it, I had a notion that there was a dearth of decent information about VAT for artists - and it seems I was correct.

In compiling the information and writing the content I've taken the line that

I am not a VAT professional and
the information is neither complete, comprehensive or definitive.

That's because it would take a team of people to stay on top of all the various aspects of VAT and how they relate to art!

However the fact that it's a vast and technical subject should not mean that artists and art professionals should remain in ignorance of what's involved,

Not least because getting it wrong can mean major tax bills and penalties for not recognising the need to charge VAT and not submitting both the paperwork and the payments due on time.

So the aim of the page is to provide a baseline of information and some links to the official guidance and decent advice articles which can tell you more.

VAT for Artists covers...

ABOUT VAT

VAT Basics - What is VAT; VAT Tariff Rates
VAT on Art

ABOUT VAT AND THE ART BUSINESS

sales of art
artists' business activity
art education
art museums
commercial art galleries
online galleries
cross border sales and distance selling
open exhibition organisers and art competitions
digital art services and art supplies

Learn how and where to find out what you need to know about VAT for:
artists, art teachers, art exhibition and competition organisers, museums and galleries, and VAT on art supplied or sold by artists in UK and/or EU

What's the good news?

The good news is that

Government guidance on the topic has improved enormously from the time I first became involved with VAT and then subsequently had to deal with VAT returns. It's now a lot more accessible than the legalese I had to deal with in the past!
VAT almost certainly does not apply to leisure artists and all those making low levels of income from their art.

Unless you are supplying any digital related goods or services related to art - where the threshold for VAT registration is £zero - in which case you need to hurry over to the page and read up on the section about VAT and Digital Art Services and Art Supplies!

If you have articles or websites to suggest as useful additions to the page please leave a comment and include the URL. I'll publish the comment if the link is added.

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Art Business Info: NEWS

UK: Making Tax Digital - update (July 2020)

What you need to know

VAT for Artists UPDATE #1/2019

Major update - art education and digital services

Two new sections re. turnover and art societies

Tax Tips for Artists - a talk at Heatherley School of Art

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

VAT for Artists

VAT for Artists covers...

What's the good news?

Art Business Info. News for Artists

Visitors so far

GET Art Business Info. NEWS by Email

Author

Archives

Categories

Art Business Info: NEWS

UK: Making Tax Digital - update (July 2020)

What you need to know

VAT for Artists UPDATE #1/2019

Major update - art education and digital services​

Two new sections re. turnover and art societies​

Tax Tips for Artists - a talk at Heatherley School of Art

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

VAT for Artists

VAT for Artists covers...​

What's the good news?​

Art Business Info. News for Artists

Visitors so far

GET Art Business Info. NEWS by Email

Author

Archives

Categories

Major update - art education and digital services

Two new sections re. turnover and art societies

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

VAT for Artists covers...

What's the good news?