Paying Tax

[bythesea]

[quote name='WalMan' post='542016' date='Jul 16 2009, 10:28 AM']Instruments, amps etc (things that have an expected life longer than a couple of years) are capital items against which you can claim...[/quote]
For some people you might be able to add strings to that list

All good advice (and it sounds like you worked for them more recently than me, but I remember those estimated assessments).

[cheddatom]

[quote name='WalMan' post='542016' date='Jul 16 2009, 10:28 AM']I keep thinking I should add something to the WIKI, but life is just too short sometimes[/quote]

You could just copy and paste the massive post you just made.

[sdgrsr400]

A further point to bear in mind is that if one band member decides to provide full accounting of their expenses, but another one just trousers the cash, then if the IR/Benefits finds out about the connection then it might well be able to use the evidence of the former against the latter.

[WalMan]

[quote name='bythesea' post='542021' date='Jul 16 2009, 10:33 AM']For some people you might be able to add strings to that list

All good advice (and it sounds like you worked for them more recently than me, but I remember those estimated assessments).[/quote]
I've just come over to the light, and as one of the girls & I at the ex of the office get together last night rather ashamedly admitted are starting to find bits interesting

[WalMan]

[quote name='gareth' post='542149' date='Jul 16 2009, 12:37 PM']In my experience you can therefore have the best of both worlds, by being honest with HMRC (and have no worries in this area if you are a worrier) and get money back![/quote]

Indeed, but as above there will come a time with claiming losses every year that they will say "enough, it's a hobby"

Should add to my earlier screed for motoring costs if you are receiving less that £15k a year for gigging you do not need to keep all your motoring receipts but can claim 40p/mile for the first 10k muso miles and 25p/mile thereafter which makes your claim a bit easier. Nothing to stop you claiming the actual costs, but it saves the hassle.

I have been waiting for a further enquiry with so many of the pubs we play wanting the works on the receipt to be signed at the end of the gig - NI numbers, address, phone etc (funny how the rest of the band suddenly forget how to write at the end of the evening!).

I keep all my receipts but have never gone for claiming a loss even in years that I have been sent a return - because at the end of the day it is just a hobby for me that keeps me from taking an automatic weapon into the office & creating carnage, and really only breaks even once you add it all up. I just add a note in the additional info section of the return to the effect that "I received £x during the year as a musician. This is a hobby and taking account of all expenses does not give rise to a profit"

Now if you are in a functions band playing once or twice a week and getting rather more than £20-30/gig, while travelling an 80 mile round trip to do it, then that would probably not suffice, but for what I do I believe it is sufficient and at least gets something on file.

And as mentioned elsewhere if you do sign a receipt don't sign a blank with no reference to the amount on it or you could end up on the sh*tty end of a bent landlord returning a whole lot more than he paid you to the brewery for his entertainment budget & pocketing the rest

[leftybassman392]

Just a further point about buying & selling gear. As has been said already, if you buy gear to use within your business you can claim it as a capital expense over a period of years.

Couple of things about selling gear that you need to pay attention to (and lots of self employed people are kind of lazy about this); when you sell it the proceeds from the sale get added to your yearly income as a single amount - whether or not you made a profit on the subsequent sale is irrelevant for tax purposes. If you don't declare the sale you could be in trouble later.

Also, don't forget to remove it from your capital expenses claim - not usually a big deal unless it was very expensive to start with, but if you're claiming tax relief for something you no longer possess a vindictive tax person could get nasty. (Technically I believe it's fraud, but happy to be corrected if someone knows better. IR types don't like the idea that you're conning them out of money...)

BTW, I'm definitely not an HMRC mole - that's one..... :ph34r:

[jakenewmanbass]

[quote name='leftybassman392' post='542715' date='Jul 16 2009, 10:44 PM']Couple of things about selling gear that you need to pay attention to (and lots of self employed people are kind of lazy about this); [b]when you sell it the proceeds from the sale get added to your yearly income as a single amount [/b]- whether or not you made a profit on the subsequent sale is irrelevant for tax purposes. If you don't declare the sale you could be in trouble later.[/quote]

I don't think thats exactly correct, I think in fact the sale price gets added into your capital pool as a positive amount eg if your pool was 4k and you sold equipment for 1k your pool is now 3k.
Last (tax) year I sold a bass for a profit as I'd owned it for 20yrs and I was advised by the (very helpful) people on the HMRC helpline that this was the correct course of action.

[leftybassman392]

[quote name='jakesbass' post='542727' date='Jul 16 2009, 11:02 PM']I don't think thats exactly correct, I think in fact the sale price gets added into your capital pool as a positive amount eg if your pool was 4k and you sold equipment for 1k your pool is now 3k.
Last (tax) year I sold a bass for a profit as I'd owned it for 20yrs and I was advised by the (very helpful) people on the HMRC helpline that this was the correct course of action.[/quote]

Fair point - I'm no tax expert and am happy to bow to your superior knowledge. However the basic point of remembering to declare it remains true, otherwise you could be accused of attempting to avoid paying tax that's due.

I do agree with you when you hint that HMRC gets a bad press unfairly. Despite the horror stories posted in this thread, tax officials are for the most part not out to get you. Most of them see themselves as there to help you get it right. One of my neighbours works for HMRC and is a thoroughly nice man.

[WalMan]

[quote name='jakesbass' post='542727' date='Jul 16 2009, 11:02 PM']I don't think thats exactly correct, I think in fact the sale price gets added into your capital pool as a positive amount eg if your pool was 4k and you sold equipment for 1k your pool is now 3k.
Last (tax) year I sold a bass for a profit as I'd owned it for 20yrs and I was advised by the (very helpful) people on the HMRC helpline that this was the correct course of action.[/quote]
Broadly correct. But you might want to double check that Jake. PM me some details if you like)

You will normally have a pool of capital items including bass, amp, pedals/effects. Anything the has a mixed private/business use (for example your car if you don't just claim 40ppm as above, or your PC) goes in its own separate pool.

So you have a pool of gear you are claiming a writing down allowance for - 25% of the balance up to April 2008, 20% since then. Its written down value is £4k and you sell a bass for £1k then £1k comes off the pool value [b]UNLESS[/b] you were lucky and bought a bass that became a sort after item and only originally cost you £750 (say) which was the value that it came into the pool at originally. In that case you only knock £750 off the £4k. The balance (profit) you made on the bass is potentially liable as a capital gain, but will probably be exempt under what is known as the small chattels rule.

As well as the £50k AIA mentioned above for new purchases if you have a pool of items and the value of that pool gets down to £1k you can now write off the whole of the balance in the year it does so.

And finally (for now) a word to the wise re taking advice from HMRC helplines. They try hard, but at the blunt end have very little proper knowledge and IME will often take a stab at the right answer and get it horribly wrong. It is worth getting proper professional advice particularly if more than a few quid are at stake. I know I shall regret this but PM me if you like and I should be able to give some pointers.

That is not to heap ordure on HMRC - having come over from the dark side myself many years ago now. They have a difficult job and with the cut backs things are getting worse & worse. Many do try to help, but as I say at the call centre level have minimal training and try to answer from a crib sheet. I have heard tell of a tax adviser being told by an HMRC call centre drone that they had been taught all about tax in a coupl of weeks and did not know what all the fuss was about - and then went on to give a wrong answer to a straight forward question

Edited July 18, 2009 by WalMan

[iamapirate]

Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.

[thepurpleblob]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]

I don't do IT Consultancy for the sole purpose of money, but it sure is handy

[ironside1966]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]

not met many pros then.
If someone makes a living from playing bass then surly they are a real bassist more than if it is someone’s hobby or aspiration of a career.

Edited July 19, 2009 by ironside1966

[bythesea]

[quote name='ironside1966' post='544460' date='Jul 19 2009, 02:14 AM']not met many pros then.
If someone makes a living from playing bass then surly they are a real bassist more than if it is someone’s hobby or aspiration of a career.[/quote]
That's rather a contentious statement. Sounds as though it needs a thread of it's own if it doesn't already have one.

Edit: and should have quoted iamapirate as he started it

Edited July 19, 2009 by bythesea

[lowdown]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]

Curiosity touching base here.
What do you define as a [b]real[/b] Bassist ?

Garry

[leftybassman392]

[quote name='lowdown' post='544521' date='Jul 19 2009, 09:56 AM']Curiosity touching base here.
What do you define as a [b]real[/b] Bassist ?

Garry[/quote]

Kind of wondering about that myself. Speaking personally, I'm a real bassist with a mortgage and bills to pay. Like a lot of other people around here I suspect....

[EssentialTension]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]
Hey, I know you say '[i]sole[/i] purpose' (which could still be questionable) but your use of '[b]real[/b]' (especially with the bold emphasis) opens a bit of a hornet's nest.

I'd say what makes someone a bassist is whether that someone plays bass (whatever that is) and whether you get paid or not has nothing to do with it. How about that?

Edited July 19, 2009 by EssentialTension

[leftybassman392]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]

Another thought about this one - try telling this to a busy session player spending most of his working life sat in an orchestra pit or recording studio, and see what sort of response you get...

[yorks5stringer]

"I have heard tell of a tax adviser being told by an HMRC call centre drone that they had been taught all about tax in a coupl of weeks and did not know what all the fuss was about - and then went on to give a wrong answer to a straight forward question "

In a previous life a few years ago I set up a joint contact centre between the Council and HMRC and we remarked how long their training was, 14 full time weeks if I recall correctly.

[jakenewmanbass]

[quote name='iamapirate' post='544374' date='Jul 18 2009, 10:13 PM']Bah, I dont think any [b]real[/b] bassist plays for the sole purpose of money.[/quote]
I'm a real bassist sonny and it's been paying my bills for 20yrs.
I have my tongue in my cheek as I'm sure you're joshing but.... my bass playing would kick your ass around the block mate...

[crez5150]

[quote name='jakesbass' post='545409' date='Jul 20 2009, 03:48 PM']I'm a real bassist sonny and it's been paying my bills for 20yrs.
I have my tongue in my cheek as I'm sure you're joshing but.... my bass playing would kick your ass around the block mate...[/quote]

Bundle.... Bundle.... Bundle!!!!!!

[OldGit]

Just posted this on the thread on [url="http://basschat.co.uk/index.php?s=&showtopic=47346&view=findpost&p=471412"]Tax deductable expenses[/url] but I think it goes here too.
Our drummer/archivist and bloke what does the books has sent us this handy list of stuff you can claim for, should you get to that point.

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.

[TheRev]

[quote name='ironside1966' post='540287' date='Jul 14 2009, 01:20 PM']Tax avoidance is a criminal offence.[/quote]

I'm a bit late to the party here, but I was under the impression that tax [i]avoidance[/i], i.e. not paying any more tax than you are legally required to do, is perfectly legal and there is a whole section of the legal profession whose sole job is to work out exactly what you or your company's minimum taxable income should be. Tax [i]evasion[/i], on the other hand is illegal.

[fusionbassist1]

Sorry to be an absolute arse but I'd appreciate some clarification of this rather scary yet real threat to the lining of my pockets......

I'm 18 (no idea if this makes a difference) and this month have ran into money that's (and i can't state this propperly [b]without[/b] sounding like an arse) a lot higher than the average monthly wage in Wales purely through playing bass on various sessions, some of which for TV.

I don't have any other source of income what so ever and although this has been an amazing month I am constantly earning some kind of money from music by doing gigs but have been told by some people that it has to be regular or over some kind of bracket etc.

If i've got what i've read correct I should always be keeping receipts of anything music-related and records of my fees etc in fear of mr taxman claiming I owe him a hillarious amount due to unannounced earnings?

If so (and forgive my absolute lack of knowledge on the topic) wouldn't it be easier to just declare all my earnings and set my self up as a self-employed musician and take the whole tax on the chin?

And if i [b]did[/b] do that i would then be able to claim musical instruments etc as a working expense with an allowance of up to £50,000 a year with me getting a tax return from these purchases periodically over a period of years.

OldGit has kindly posted a list of things that could be claimed as expense (cheers!)

I generally like to think i know the whole PRS side of things and stuff like that but this is something i've never had to propperly think about and people seem to just go "oh it'll be fine no one will know" in a fairly flippant manner when I try to get the jist of just what's going on in regards to tax :/

Any clarification would be really, really appreciated.

[OldGit]

[quote name='fusionbassist1' post='553958' date='Jul 28 2009, 02:07 PM']Sorry to be an absolute arse but I'd appreciate some clarification of this rather scary yet real threat to the lining of my pockets......

I'm 18 (no idea if this makes a difference) and this month have ran into money that's (and i can't state this propperly [b]without[/b] sounding like an arse) a lot higher than the average monthly wage in Wales purely through playing bass on various sessions, some of which for TV.

I don't have any other source of income what so ever and although this has been an amazing month I am constantly earning some kind of money from music by doing gigs but have been told by some people that it has to be regular or over some kind of bracket etc.

If i've got what i've read correct I should always be keeping receipts of anything music-related and records of my fees etc in fear of mr taxman claiming I owe him a hillarious amount due to unannounced earnings?

If so (and forgive my absolute lack of knowledge on the topic) wouldn't it be easier to just declare all my earnings and set my self up as a self-employed musician and take the whole tax on the chin?

And if i [b]did[/b] do that i would then be able to claim musical instruments etc as a working expense with an allowance of up to £50,000 a year with me getting a tax return from these purchases periodically over a period of years.

OldGit has kindly posted a list of things that could be claimed as expense (cheers!)

I generally like to think i know the whole PRS side of things and stuff like that but this is something i've never had to propperly think about and people seem to just go "oh it'll be fine no one will know" in a fairly flippant manner when I try to get the jist of just what's going on in regards to tax :/

Any clarification would be really, really appreciated.[/quote]

Yes.
If you earn a certain amount money in this country you should pay tax on it. Them's the rules. It's abouyt £4000 per year minumum I think.

So get your self an accountant, keep my list of stuff and save every receipt you get.
Keep all your invoices (that you send to studios, band managers, gigs, whatever) and keep a note of what you got paid and when.

Then when tax time comes around you can give your accontant a nicely filled in XL file (which they will probably send to you) with all the details of what you earned, what you spent and what you own and he or she can then work out what you owe the revenue and negotiate a deal with them for you. (that's the bit your really need an accountant for)
It isn't hard, it won't cost a fortune and it is well worth getting a proper acountant to do it.

One tip is to organise your expenses receipts etc yourself into logical monthly groups like living, housing, motoring, travel, clothes, cleaning, instruments, strings and other consumables, working food, etc for July, then another set for August etc

Don't just chuck everything in a shoe box and then give your accountant the shoe box full of stuff in March .. They will charge you £50 and hour to sort your receipts into logical groupings and you can do that yourself.

[leftybassman392]

[quote name='fusionbassist1' post='553958' date='Jul 28 2009, 02:07 PM']Sorry to be an absolute arse but I'd appreciate some clarification of this rather scary yet real threat to the lining of my pockets......

I'm 18 (no idea if this makes a difference) and this month have ran into money that's (and i can't state this propperly [b]without[/b] sounding like an arse) a lot higher than the average monthly wage in Wales purely through playing bass on various sessions, some of which for TV.

I don't have any other source of income what so ever and although this has been an amazing month I am constantly earning some kind of money from music by doing gigs but have been told by some people that it has to be regular or over some kind of bracket etc.

If i've got what i've read correct I should always be keeping receipts of anything music-related and records of my fees etc in fear of mr taxman claiming I owe him a hillarious amount due to unannounced earnings?

If so (and forgive my absolute lack of knowledge on the topic) wouldn't it be easier to just declare all my earnings and set my self up as a self-employed musician and take the whole tax on the chin?

And if i [b]did[/b] do that i would then be able to claim musical instruments etc as a working expense with an allowance of up to £50,000 a year with me getting a tax return from these purchases periodically over a period of years.

OldGit has kindly posted a list of things that could be claimed as expense (cheers!)

I generally like to think i know the whole PRS side of things and stuff like that but this is something i've never had to propperly think about and people seem to just go "oh it'll be fine no one will know" in a fairly flippant manner when I try to get the jist of just what's going on in regards to tax :/

Any clarification would be really, really appreciated.[/quote]


Any of a whole bunch of people that frequent this place can answer this for you, but since I seem to have got here first I'll make a start:-

If you are earning money (ANY significant money) by playing your instrument then you need to get yourself set up as a self-employed musician - I believe I'm still correct in saying that you should normally declare yourself as a sole trader. There are documents on the HMRC website that tell you how to do this.

It's important that you do it fairly soon if you plan a career as a musician. Others will be able to give you more details about why it's important.

As a self employed person you will get paid for the work you do. This is income.

You will incur costs in carrying out your business. This is expenditure.

Your expenditure can be offset against your income - there are two principal types: 1. revenue expenditure (broadly speaking, day-to-day costs such as fuel, strings, etc.); and 2. capital expenditure (broadly speaking, purchase costs of major items you need to conduct your business such as basses, amps & other large cost items.) How you do this can look incredibly complex if you read too many HMRC documents, but the basic idea is simple - if it's expensive and/or essential to your business then it's a capital item (you can't really be a bassist without a bass...), and if it's less expensive and incurred progressively over a period of time (fuel for your car for example) then it's a revenue item. There is a bit of a grey area on certain kinds of things, but in time you'll figure it out.

When you subtract all your expenses from your income what you have left is your profit. This is taxable. Whether you actually pay tax depends what your profit is. The calculation is done annually.

Others will no doubt fill in the gaps and correct the errors of detail that I've no doubt made.