Tax deductable?

[Owen]

If I were to spend more than I think reasonable on a pair of custom moulded in-ear headphones are they tax deductable like an instrument is, or can I get a larger percentage of the outlay back?

Just for clarification, I have self employed status.

[woodster]

For tax purposes, any item claimed needs to be obviously related to the nature of the work, the HMRC call it necessary and ordinary.
It could be argued that headphones for an Ipod kinda situation wouldn't be necessary but in-ear monitoring or ear protection WOULD be.
Certainly my ear plugs ARE tax deductable and I would be inclined to claim for headphones as an business accessory.

I have to add that I'm no expert as I have an accountant to do all that stuff for me.

[jakenewmanbass]

I'm also self employed and if I were to buy them they would not be capital with a WDA (writing down allowance or percentage claim) I would claim the full amount as an expense.

Also FWIW instruments are not tax deductable in the sense in which I think you mean (correct me if I'm wrong), tax deductable as expenditure is what you spend in operating the business (i.e strings fuel costs office etc etc). Your instruments are capital investements and you are allowed 40% of their value in the year of purchase and 25% on the diminishing value in subsequent years. Thats how I understand it, the two things are in separate places on the tax return although it's arguable that it's all tax deductable

Edited April 24, 2009 by jakesbass

[Owen]

[quote name='jakesbass' post='471423' date='Apr 24 2009, 12:35 PM']I'm also self employed and if I were to buy them they would not be capital with a WDA (writing down allowance or percentage claim) I would claim the full amount as an expense.

Also FWIW instruments are not tax deductable in the sense in which I think you mean (correct me if I'm wrong), tax deductable as expenditure is what you spend in operating the business (i.e strings fuel costs office etc etc). Your instruments are capital investements and you are allowed 40% of their value in the year of purchase and 25% on the diminishing value in subsequent years. Thats how I understand it, the two things are in separate places on the tax return although it's arguable that it's all tax deductable[/quote]

I figured that they would be an expense. Obv, I will clarify this with an accountant, but it is good to get a feel of things. Obv this is the wrong side of the tax year

The instruments as capital invesments is what I should have said - that is how I do that.

Thanks.

[tombboy]

I claim for all my musical purchases... music therapy for the kids in the home!

[Owen]

I've been doing some research around the WWW as well and it turns out that in the recent past - but not now - you could claim for 100% of the cost of a computer against your tax bill. I would be new computered to the max if that was still applicable!

[thunderbird13]

[quote name='owen' post='471522' date='Apr 24 2009, 02:04 PM']I've been doing some research around the WWW as well and it turns out that in the recent past - but not now - you could claim for 100% of the cost of a computer against your tax bill. I would be new computered to the max if that was still applicable![/quote]

Just to clarify when you say 100 % tax allowance in the recent past , you mean you could claim the full cost in the same year of trading whereas nowdays it would attract the 40 % (or 50 % if you qualify) and then the remainder would be claimed back over future tax years

[BottomEndian]

[quote name='jakesbass' post='471423' date='Apr 24 2009, 12:35 PM']I'm also self employed and if I were to buy them they would not be capital with a WDA (writing down allowance or percentage claim) I would claim the full amount as an expense.

Also FWIW instruments are not tax deductable in the sense in which I think you mean (correct me if I'm wrong), tax deductable as expenditure is what you spend in operating the business (i.e strings fuel costs office etc etc). Your instruments are capital investements and you are allowed 40% of their value in the year of purchase and 25% on the diminishing value in subsequent years. Thats how I understand it, the two things are in separate places on the tax return although it's arguable that it's all tax deductable[/quote]
I could be out of date but as far as I know, as of 6th April 2008, businesses have an Annual Investment Allowance, meaning they can take 100% allowance for the first £50,000 of assets purchased in the financial year. I'm not sure what the caveats are in the AIA scheme, but I think instruments, amps, IEMs and the like should be allowable -- as long as they're solely for business purposes, of course!

So in terms of profit and income tax, it doesn't make any difference if you claim them as an expense or as a capital investment. Either way, the whole amount's tax deductible!

I've noticed that HMRC don't seem to have made a song and dance about the AIA, to the extent that some accountants are still unaware of it!

[jakenewmanbass]

[quote name='BottomEndian' post='471691' date='Apr 24 2009, 04:47 PM']I could be out of date but as far as I know, as of 6th April 2008, businesses have an Annual Investment Allowance, meaning they can take 100% allowance for the first £50,000 of assets purchased in the financial year. I'm not sure what the caveats are in the AIA scheme, but I think instruments, amps, IEMs and the like should be allowable -- as long as they're solely for business purposes, of course!

So in terms of profit and income tax, it doesn't make any difference if you claim them as an expense or as a capital investment. Either way, the whole amount's tax deductible!

I've noticed that HMRC don't seem to have made a song and dance about the AIA, to the extent that some accountants are still unaware of it![/quote]

Thats very interesting
I shall look into it. Thanks

[jbwaddy]

my old head of department at perth college once claimed for a cassette radio for her car as she argued that in order to get through all the assesments on time she had to listen to them in the car. she said she wouldnt normally have a cassette radio in the car as she deemed them to be dangerous(a bit of a lie) and wouldnt normally have one for that reason. outcome from the tax man? yes thats fine you can claim the full amount of your in car stereo!! amazing what you can get away with isnt it.

[BottomEndian]

[quote name='jakesbass' post='471696' date='Apr 24 2009, 04:53 PM']Thats very interesting
I shall look into it. Thanks[/quote]
No probs. I only know about it because I've set up a new business in the last financial year, and I'm [b]very[/b] happy to be able to claim back all £10k+ of the shop-fit, EPoS system, etc. etc. etc. rather than it trickling back over the course of its lifetime.

I may be misremembering, but I think the AIA also includes some sort of "amnesty" on asset pools of less than £1k. If you've got a written-down asset value of less than £1,000, you can take 100% as an allowance. I think. Don't quote me!

Edited April 24, 2009 by BottomEndian

[Owen]

BEST THREAD EVER!!!!!!!!!!!!!!!

Apart from the fact that I did not start it a month ago when I could have had a splurge before the end of the tax year

[bassace]

[quote name='jakesbass' post='471696' date='Apr 24 2009, 04:53 PM']Thats very interesting
I shall look into it. Thanks[/quote]

Yes, it's caught me by surprise as well. Not very well trailed as far as I'm aware. I thought I'd completed my 2008/09 accounts nice and early and it's now put everything out of kilter. Back to the drawing board.

[BottomEndian]

[quote name='bassace' post='471829' date='Apr 24 2009, 08:17 PM']Yes, it's caught me by surprise as well. Not very well trailed as far as I'm aware.[/quote]
Indeed. It was originally mooted in the 2007 Budget, then set in motion in the 2008 Budget, buried under mountains of other stuff. It's hard to find even on the HMRC website. This might help:
[url="http://www.hmrc.gov.uk/briefs/company-tax/brief6608.htm"]http://www.hmrc.gov.uk/briefs/company-tax/brief6608.htm[/url]

I've never liked the way it's "plant and machinery". If you delve into it, that's defined as pretty much every possible asset except cars. If I were a pro musician, I'd hate to think of my instruments as "plant and machinery".

[WalMan]

[quote name='BottomEndian' post='471691' date='Apr 24 2009, 04:47 PM']I could be out of date but as far as I know, as of 6th April 2008, businesses have an Annual Investment Allowance, meaning they can take 100% allowance for the first £50,000 of assets purchased in the financial year. I'm not sure what the caveats are in the AIA scheme, but I think instruments, amps, IEMs and the like should be allowable -- as long as they're solely for business purposes, of course!

So in terms of profit and income tax, it doesn't make any difference if you claim them as an expense or as a capital investment. Either way, the whole amount's tax deductible!

I've noticed that HMRC don't seem to have made a song and dance about the AIA, to the extent that some accountants are still unaware of it![/quote]
No your not so for most capital out lay (amps basses etc) you can get a full deduction for the outlay.

Bear in mind that when you sell you will have a tax hit for the sale proceeds as a balancing charge, so for a bass that holds its value you will get a hit in due course it is only a timing saving. Be prepared for that.

Earplugs for IEM's I would say are almost a consumable as they could well not last more than a couple of years with gigging wear & tear.

Custom moulded ear defenders are just that, moulded to your ears so no use to anyone else and whilst they might just be argued to be capital should easily fall within the AIA so be fully deductible.

Computers, you would need to make an adjustment for private use, same for cars & telephone calls.

I too am amazed that some accountants seem to be unaware of the AIA. It's been coming for a while & if they are keeping up with their CPD they really ought to know.

[WalMan]

[quote name='jbwaddy' post='471701' date='Apr 24 2009, 04:54 PM']my old head of department at perth college once claimed for a cassette radio for her car as she argued that in order to get through all the assesments on time she had to listen to them in the car. she said she wouldnt normally have a cassette radio in the car as she deemed them to be dangerous(a bit of a lie) and wouldnt normally have one for that reason. outcome from the tax man? yes thats fine you can claim the full amount of your in car stereo!! amazing what you can get away with isnt it.[/quote]
I doubt she'd get away with it now, but with some of the muppets left on the darkside nothing would surprise me.

[Owen]

When I started a long time ago I had an accountant. After 3 years I muttered to him that I felt I was paying too much tax. He said that he would look into it and I got a £2K rebate. I have done my own books since then. I think I need to ask around my local muso community and find a new accountant.

Is it possible to put purchases made lets say on this coming Wednesday back into the tax year that has just finished? I realise that this is a stupid question, but I cannot stop myself from asking it.

[bassace]

[quote name='owen' post='472675' date='Apr 26 2009, 02:01 PM']Is it possible to put purchases made lets say on this coming Wednesday back into the tax year that has just finished? I realise that this is a stupid question, but I cannot stop myself from asking it.[/quote]

Doubt it.

[Owen]

[quote name='bassace' post='472751' date='Apr 26 2009, 04:32 PM']Doubt it.[/quote]

So do I, but I am on a roll! I have heard of friends doing it, but was not sure if it was kosher. Guessing not.

[BottomEndian]

[quote name='owen' post='472675' date='Apr 26 2009, 02:01 PM']Is it possible to put purchases made lets say on this coming Wednesday back into the tax year that has just finished? I realise that this is a stupid question, but I cannot stop myself from asking it.[/quote]
If you can get your supplier to fraudulently date the invoice such that it falls within the financial year just finished, then that sorts it.

The key word here is "fraudulently"!

[Owen]

[quote name='BottomEndian' post='472849' date='Apr 26 2009, 07:05 PM']If you can get your supplier to fraudulently date the invoice such that it falls within the financial year just finished, then that sorts it.

The key word here is "fraudulently"! [/quote]

I guessd as much. That will be a no then.

Thanks everyone

[truegeminis]

[quote name='owen' post='472879' date='Apr 26 2009, 07:36 PM']I guessd as much. That will be a no then.

Thanks everyone [/quote]


It really depends on what the expense is for and to which period it relates. For example, if you pay an accountant to draft your return for the 08-09 tax year but he sends you his invoice for this service in Jan 2010 he will probably have accrued this expense in your 08-09 return as it relates directly to this particular tax year. Of course that would mean that it can't be claimed for in the 09-10 tax year in which it was actually invoiced.
If it is an expense that cannot be directly attributed to your income in 08-09 then you should not claim/accrue for it in your 08-09 tax return/accounts.

Hope that helps.

[WalMan]

Perhaps I shall give some thought to some general notes for the wiki sometime this week

[OldGit]

Our drummer/archivist and keeper of the books has just sent this list of stuff you can claim for. There may be a few new ideas here.

PERFORMERS DEDUCTABLE EXPENSES
Always keep a record of your Incoming and Outgoing Expenditure and get receipts for EVERYTHING!!!! The majority of performers are Self-Employed which means you are responsible for paying TAX and National Insurance. Information on the latest legal requirements are available from the Inland Revenue (UK) and you can find downloadable tax return software at Tax UK. There are many expenses that an entertainer/musician can legitimately deduct from their earnings, some of which are listed below.

Music/Scripts/Recordings
Coaching/Lessons
Dues (Musicians Union/Equity/AGMA/SAG/AFTRA etc.)
Subscriptions/Publications/Books
Accompanist/Session Musicians
Rehearsal Room Rental
Costumes/Clothes/Shoes & Cleaning
Make up/Wigs/Hair Dye/Hair spray
Audition/Competition Fees
Recording Studio/Sound Engineer/Producer
Master Tape/Tape/CD Duplication/Labels/Artwork
Audio/Visual Equipment
Repairs/Replacement
Leads/Plugs/Plug Boards/Power Breakers
Supplies
Equipment and other Insurance
Photos, Reprints, Advertising & Publicity
Professional Cards and Announcements
Stationary/Postage/CV/Printer Ink/Photocopying
Listing in professional directories (The White Book, Melody Maker, The Stage Newspaper)
Public Phone
Home Phone - Identified Long Distance & Business Calls
Answering Service/Machine
Local Transportation
Meals & Entertainment (in town)
Conferences & Entertainment (at home)
Gifts to Profession (show gifts, etc.)
Theater/Movie/Video Rental Tickets
Backstage Tips
Book-keeping/Accounting Fees
Entertainment Agency Commission
Artist Managers Commission
Laundry & Cleaning
Luggage & Tips
Car Rental & Petrol
Parking
Tolls
Local Transportation while on the road (taxi, bus fare, etc.)
Plane/Train Fare
Hotel/Motel/B&B or other Lodging
Utilities
TRAVEL, LODGING & MEALS AWAY FROM HOME
(Expenses for gigs/competitions and auditions)
List the dates, the city you were in, number of days you were there and get receipts for all meals/drinks purchased.

The amount you can deduct depends on the business usage, i.e., unless the Telephone is a separate business line you may only deduct a percentage of the line rental, whilst calls concerning the business are considered a legitimate expense, personal calls to mates & family are not!! This is the same for Utilities, Vehicles, Travel etc., Anything that is purchased and used in conjunction with the business is a deductable expense.

You should also consider taking out a private Pension, Equipment Insurance and Public Liability Insurance (the latter is required for outdoor performances & larger gigs, check with the organiser, promoter or venue as they may already provide cover).

There are several sources of free help and advice available for individuals and groups who wish to set up in business. Click Here for job listings and information on careers in music or browse the Business & Finance Resources. (UK & USA listings).

If you are still dubious about tackling your own accounts (& are earning enough to pay the fees!) contact:

Association of Music Industry Accountants
Unity House
205 Euston Road
London NW1 2AY
Tel:- 020 7383 9200
for a list of registered members or browse our listings of Music Accountants.