Tax and Performers – what can you claim? Reply

Most people don’t like doing accounts and actors, singers, musicians, dancers and performers are no exception.

Making Tax Digital will mean they will need to be on top of their expenses in order to do quarterly returns from April 2018.

Here is quick summary of claimable expenses.

Section 352 Limited deduction for agency fees paid by entertainers

(1) A deduction is allowed from earnings from an employment as an entertainer for agency fees (and any value added tax on them) if the fees are calculated as a percentage of the whole or part of the earnings from the employment.

This is subject to the limit in subsection (2).

(2) Amounts may be deducted under this section in calculating the net taxable earnings from an employment in a tax year only to the extent that, in aggregate, they do not exceed 17.5% of the taxable earnings from the employment in the tax year.

(3) Subsections (4) and (5) apply for the purposes of this section.

(4) “Entertainer” means an actor, dancer, musician, singer or theatrical artist.

(5) “Agency fees”, in relation to an employment, means—

(a) fees paid under a contract between the employee and another person, to whom the fees are paid, who—

(i) agrees under the contract to act as an agent of the employee in connection with the employment, and

(ii) at the time the fees are paid is carrying on an employment agency with a view to profit, and

(b) fees paid under an arrangement under which a co-operative society or the members of such a society agree to act as the employee’s agent in connection with the employment.

(6) For the purposes of subsection (5)—

“co-operative society” does not include a society which carries on or intends to carry on business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with or lent to the society or any other person, and

“employment agency” has the meaning given by section 13(2) of the Employment Agencies Act 1973 (c. 35).

http://www.legislation.gov.uk/ukpga/2003/1/section/352

Trade and Magazine Subscriptions

You can claim for:

  • trade or professional journals
  • trade body or professional organisation membership

Travel & Subsistence

The normal rules apply https://stevejbicknell.com/2017/03/27/what-are-the-rules-on-subsistance-and-travel/

Travel to auditions, rehearsals and performance related activities should all be claimable.

Car Mileage can also be claimed at 45p for the first 10,000 miles then 25p per mile

Clothing and Costume Cleaning

If the clothing is for a performance then it should be fine but if used for personal use it has duality of purpose and can’t be claimed.

Generally rehearsal clothes can’t be claimed.

If the clothing counts as for a performance then the cleaning costs can be claimed

Other things

Tickets to events, shows, movies and museums may be claimable if they are for research purposes.

Props and equipment, even Ipads and computers could also be business expenses.

Websites, marketing, photography can all be business expenses.

Working form Home can also be claimed https://stevejbicknell.com/2015/02/02/simplified-expenses-working-from-home/

Also Mobile phones, stationery, insurance, accountancy and many more

 

steve@bicknells.net

How do you correct errors at Companies House? Reply

Basically there are 2 procedures to correct errors at companies house.

Amending Published Accounts

You must send amended accounts to Companies House on paper.

Amended or corrected accounts must be for the same period as the original accounts.

You must clearly say in your new accounts that they:

  • replace the original accounts
  • are now the statutory accounts
  • are prepared as they were at the date of the original accounts

You must write “amended” on the front – the accounts may be rejected as duplicates if you don’t.

Your original accounts will remain on file at Companies House.

If you only want to amend one part of your accounts, you need to send a note saying what’s been changed. The note must be signed by a director and filed with a copy of the original accounts.

https://www.gov.uk/annual-accounts/corrections-and-amendments

Depending on the changes made you might also need to change the corporation tax returns!

Second Filing of Documents (RP04)

The Mini Finance Bill Reply

The Finance Bill 2017 was to be the largest at 762 pages but in order to rush it though it was cut to 148 pages!

That’s an 80% reduction dropping 72 out of the 135 clauses and 18 out of 29 schedules.

One of the items dropped was Making Tax Digital (MTD).

But its widely expected that following the general election there will be another bill to bring in all the items that were dropped.

Our tax system is already far too complex:

  • 6,102 pages of legislation (according to Tolleys in 2012)
  • 639 monetary values
  • 425 thresholds
  • 214 penalties

Its a shame they couldn’t cut all the tax rules by 80%!

 

steve@bicknells.net

Can HMO’s and Residential Properties claim Capital Allowances? Reply

Capital Allowances are for commercial properties.

https://stevejbicknell.com/2017/02/21/why-are-capital-allowances-important-on-commercial-property/

They can be worth a lot money, sometimes a third of the property value can be plant and machinery and they are often over looked and under claimed.

There are companies who say you can claim them for HMOs but that doesn’t fit with rules!

Yes you could but them on your tax return but that doesn’t mean you have a valid claim as HMRC have process now and check later approach.

Here are the rules…

Capital Allowances Act 2001

http://www.legislation.gov.uk/ukpga/2001/2/section/35

The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house.

General: Definitions: Dwelling house

CAA01/S531

There are several references to dwelling house in CAA2001. The term appears in Part 2 (plant and machinery allowances), Part 3 (industrial buildings allowances), Part 3A (business premises renovation allowances), Part 6 (research and development allowances) and Part 10 (assured tenancy allowances).

For Part 10 (ATA) only “dwelling house” is given the same meaning as in the Rent Act 1977 (CAA01/S531).

There is no definition of “dwelling house” for the other Parts and so it takes its ordinary meaning. A dwelling house is a building, or a part of a building; its distinctive characteristic is its ability to afford to those who use it the facilities required for day-to-day private domestic existence. In most cases there should be little difficulty in deciding whether or not particular premises comprise a dwelling house, but difficult cases may need to be decided on their particular facts. In such cases the question is essentially one of fact.

A person’s second or holiday home or accommodation used for holiday letting is a dwelling house. A block of flats is not a dwelling house although the individual flats within the block may be. A hospital, a prison, a nursing home or hotel (run as a trade and offering services, whether by the owner-occupier or by a tenant) are not dwelling houses.

A University hall of residence may be one of the most difficult types of premises to decide because there are so many variations in student accommodation. On the one hand, an educational establishment that provides on-site accommodation purely for its own students, where, for example, the kitchen and dining facilities are physically separate from the study-bedrooms and may not always be accessible to the students, is probably an institution, rather than a “dwelling-house”. But on the other hand, cluster flats or houses in multiple occupation, that provide the facilities necessary for day-to-day private domestic existence (such as bedrooms with en-suite facilities and a shared or communal kitchen/diner and sitting room) are dwelling-houses. Such a flat or house would be a dwelling-house if occupied by a family, a group of friends or key workers, so the fact that it may be occupied by students is, in a sense, incidental.

The common parts (for example the stairs and lifts) of a building which contains two or more dwelling houses will not, however, comprise a dwelling-house.

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca11520

steve@bicknells.net

Are you an employee and is a yacht a ship for the seafarers earnings deduction? Reply

The rules say….

If you’re an employee and work at sea, you may be able to reduce your tax bill by getting the Seafarers’ Earnings Deduction.

To get the deduction you must have:

  • worked on a ship
  • worked outside of the UK long enough to qualify for the deduction – usually a minimum of 365 days
  • been resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK)

You can’t get the deduction if you were:

  • a Crown employee (eg, a Royal Navy sailor)
  • not a UK resident
  • not a resident of an EEA State (other than the UK)

If you had more than one job you’ll still get the deduction against your seafarer pay if you meet all the conditions.

https://www.gov.uk/guidance/seafarers-earnings-deduction-tax-relief-if-you-work-on-a-ship

So if you are self employed – Sole Trader or Partnership – you can’t be an employee.

If you work on cruise ship or a shipping line you will probably be an employee so that’s fine but if you would on other ships then you should create your own Limited Company so that you can be an employee.

HMRC are actively investigating many self assessment returns where the claim for Seafarers Deductions has been incorrectly made.

The mechanics of the deduction –  the first stage is to calculate what the legislation (ITEPA 2003, s 378(2) and (3)) calls an eligible period, which:

  • is a period of at least 365 days;
  • begins and ends with a period of absence from the UK;
  • does not include any single period of presence in the UK in excess of 183 days; and
  • at least half of which is spent outside the UK (the 50% test to which All at Sea refers).

Then its based on employment earnings.

Here is a tax calculator to help http://seafarerstaxcalculator.com/

A Ship is large sea vessel carrying passengers or cargo, so its unlikely a yacht would be considered a ship. Although if its large enough it might.

steve@bicknells.net

 

Making Tax Digital – Sanctions for Late Submission and Late Payment Reply

Making Tax Digital is coming soon!

It will will eventually affect us all, businesses including property investors will have to initially file their accounts quarterly and then ultimately monthly.

For many this will be a huge shift from annual accounts and self assessment returns.

HMRC will be able to estimate your tax each time you submit a return.

The government have confirmed that taxpayers will be given a period of at least 12 months before they will be charged any late submission penalties in relation to their Making Tax Digital for Business obligations.

Making Tax Digital – sanctions for late submission and late payment is open for you to respond until 11 June. The consultation seeks views on three possible models for late submission penalties and provides an update on late payment penalty interest.

Model A – the Points Based System

Model B – Compliance Reviews with Penalties

Model C – Suspension with conditions

Read further details at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/601136/Making_Tax_Digital_-_sanctions_for_late_submission_and_late_payment.pdf

steve@bicknells.net

Working abroad? what about Principle Private Residence Relief? Reply

There are special rules if you work overseas (and rules for working away in the UK)
This blog focuses on working overseas. The important thing to make sure you keep good records and tell your accountant!
Office/employment outside UK
TCGA92/S223 (3) (b)
You may allow relief for a period of absence of any length throughout which an individual worked in an employment or office all the duties of which were performed outside the United Kingdom, or a period of absence throughout which the individual lived with a spouse or civil partner who worked in such an employment or office if the conditions set out in CG65046 are fulfilled.
All of the duties of the employment must be performed outside the United Kingdom. You can ignore any return to the United Kingdom for holidays, but you should not ignore any duties which are in practice performed in the United Kingdom even if they are only incidental to the main duties performed outside the United Kingdom.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65040

Condition A
Before the period of absence there must be a time during which the dwelling house was the individual’s only or main residence.
Condition B

After the period of absence there must be a time during which the dwelling house is the individual’s only or main residence (if within S223 (3) (a), (b), (c) or (d))

Use of residence during period of absence
It does not matter how the residence is used during a qualifying period of absence. For example, it may be let without any loss of relief.

 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65050

steve@bicknells.net

Payroll Year End 2017 – What about P11D’s? Reply

By now you will have already processed your payroll year end and submitted the final RTI submissions.

You have to pay your PAYE by 19th April and issue P60’s by 31st May.

So the next main date is P11D Benefits in Kind! due by 6th July

Last year Dispensations ended and Payrolling Benefits became an option but you must be registered

If you choose to payroll you can tell HM Revenue and Customs (HMRC) online. You need to register online before the start of the tax year you want to payroll for.

You must add the cash equivalent of the employees’ benefits to their pay and then tax them through your payroll.

HMRC will make sure the value of the benefit is not included in your employees’ tax codes.

If you use the service you:

  • won’t need to use form P11D
  • still need to work out the Class 1A National Insurance contributions on benefits and complete form P11D(b)

You can exclude employees from payrolling once you’re registered, but you’ll need to send a P11D to declare the non-payrolled benefits.

Once the tax year has started you’ll have to payroll the benefits for the whole of the tax year, or until you stop providing them.

https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll

Many businesses will continue to submit P11D’s

At the end of the tax year you’ll usually need to submit a P11D form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

You’ll also need to submit a P11D(b) form if:

  • you’ve submitted any P11D forms
  • you’ve paid employees’ expenses or benefits through your payroll
  • HMRC have asked you to – either by sending you a form or an email

Your P11D(b) tells HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided.

If HMRC have asked you to submit a P11D(b), you can tell them you don’t owe Class 1A National Insurance by completing a declaration.

https://www.gov.uk/employer-reporting-expenses-benefits/reporting-and-paying

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

To qualify for an exemption, you must be either be:

  • paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
  • paying back the employee’s actual costs

steve@bicknells.net

Do you have to charge VAT when you buy things for clients? 1

When you buy things for your client on their behalf the items could be excluded from your VAT calculations if they are Disbursements

To treat a payment as a disbursement all of the following must apply:

  • you paid the supplier on your customer’s behalf and acted as the agent of your customer
  • your customer received, used or had the benefit of the goods or services you paid for on their behalf
  • it was your customer’s responsibility to pay for the goods or services, not yours
  • you had permission from your customer to make the payment
  • your customer knew that the goods or services were from another supplier, not from you
  • you show the costs separately on your invoice
  • you pass on the exact amount of each cost to your customer when you invoice them
  • the goods and services you paid for are in addition to the cost of your own services

It’s usually only an advantage to treat a payment as a disbursement if the supplier didn’t charge VAT on it, or if your customer can’t reclaim the VAT.

An example of an invoice showing disbursements and recharges

A website design consultant based in London does a week’s work for a client in Edinburgh. The consultant visits the client’s premises at the start of the week to discuss the project. The consultant also agrees to purchase a website hosting package from an Internet service provider on behalf of the client.

The consultant and the client agree the following fees:

Activity Fee
Consultant’s work £2,500 plus VAT
Consultant’s travelling expenses £300
Website hosting package purchased on the client’s behalf £150

The £300 travel cost that the consultant recharges to the client is not a disbursement so the consultant must charge VAT on it. But the cost of the website hosting package is a disbursement and can be excluded from the VAT calculation, because:

  • it was purchased for the use of the client
  • the client agreed that the consultant would arrange and pay for it on their behalf – this means the consultant agreed to act as the client’s agent
  • the consultant passed the whole £150 charge on to the client, without adding anything, as a separate item on the invoice
  • it was the client’s responsibility to pay for the goods
  • the consultant had permission from his client to make the payment
  • the client knew the web hosting package was from another supplier and not from the consultant
  • the consultant showed the costs separately in the invoice
  • the web hosting package paid for by the consultant is additional to the other services being billed to the client

The consultant’s invoice to their client for this work might include the following items:

  • design services – £2,500
  • travelling expenses – £300
  • amount on which VAT is due – £2,800
  • VAT at 20% – £560
  • disbursements – £150
  • total including VAT – £3510

steve@bicknells.net

Can a Property Flipper or Developer use Entrepreneurs Relief? Reply

City Developer

Property Flipping and Development are Trades (not investments), so YES, they could qualify for Entrepreneurs Relief.

You may be able to pay less Capital Gains Tax when you sell (or ‘dispose of’) all or part of your business.

Entrepreneurs’ Relief means you’ll pay tax at 10% on all gains on qualifying assets.

Work out if you qualify

You’ll qualify if you dispose of any of the following:

  • all or part of your business as a sole trader or business partner – including the business’s assets after it closed
  • shares or securities in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’)

https://www.gov.uk/entrepreneurs-relief/eligibility

https://stevejbicknell.com/2013/11/24/5-pitfalls-to-avoid-with-entrepreneurs-tax-relief/

How does Entrepreneurs Relief help?

Let’s take an example using a Company

Flipping or Development Profit £100,000

Corporation 20% £20,000

Profit after Tax £80,000

If close the business and you apply Entrepreneurs Relief the you will pay 10% tax = £8,000

You will also get your CGT allowance of £11k deducted first.

Without Entrepreneurs Relief the tax would 20% or even more if the distribution was via dividends or salary. For unincorporated businesses the tax could be 20%, 40% or 45%!

What are the rules for ending a business?

  • The business has ceased.
  • The assets were in use at the time of cessation.
  • The business was owned for 1 year by the individual prior to cessation.
  • The assets were disposed of within 3 years of cessation.
  • The assets are not held as investments.

However, if you do the same thing within 2 years HMRC may consider that you are only doing this to gain a tax advantage and it could then be treated as income.

steve@bicknells.net