AAL

Accounts Action Ltd is a firm of specialist show business accountants. We offer a full service of accounts preparation, VAT, tax returns and help with useful tips and advice for performers and others who work on a self-employed basis in the arts/entertainment industry.

Our clients include well known figures, writers, composers, designers, musicians, directors, artists and film makers. We pride ourselves not only on confidentiality but also on a personal problem solving service and pro-active planning working for our client’s future and retirement. Our website gives a commentary of changes in tax rates and planning advice and is kept up to date but all advice given is tailored to each client. We have a referral system to assist clients in pension planning

Our business has been serving clients from the arts and entertainment sector for over 30 years and has always been based in the West End. Currently the office is in Regent Street, so that it is very convenient for London’s theatre land.

All self-employed individuals need to submit a tax return to 5th April each year. This has to be completed by 31st October in the same year if submitting a paper return, or by 31st January of the following year if filing online.

Tax is payable on 31st January and 31st July. In an ideal world we would all have put aside enough to settle our liabilities, but often the payment due on 31st January is the killer. It invariably consists of two ingredients: the shortfall on a previous year and a payment on account for the current year. For the actor, whose income can fluctuate from year to year, this creates real hardship. A payment on account, which is based on a previous year’s income, usually bears no relation to the actual income earned in the current year. The amount to put aside could be anywhere between 10-40% of current and expected earnings. If a performer has had a rotten year, they can make a claim to reduce the payments on account. If they propose a lesser payment than the ultimate figure, they are then penalised and charged interest on the shortfall.

Under the self-assessment tax system the taxpayer does all the work for the taxman and the taxman then merely sends out tax demands based on figures that the taxpayer has provided. From time to time the taxman may decide to embark on an investigation into an individual taxpayer’s affairs. There are a number of reasons why the taxman may start an investigation such as an actor receiving tax refunds year after year, figures seeming inconsistent with previous years, or merely an investigation at random.

Just starting out?

If you are just starting out as self-employed then you need to register with the Inland Revenue within three months of commencement or you may incur a £100 late notification penalty. This is done by completing a form CWF1 or visiting an accountant who, as well as completing the form for you, can advise you on various other issues such as National Insurance Contributions, VAT, record keeping and what expenses can be claimed.

VAT (Value added tax)

If your turnover is in excess of £81,000 in any cumulative 12 month period then you should notify the VAT man and will probably have to register for VAT. This means you then have to add VAT to all your fees and account for these to the VAT man. If notification is not made within one month the individual may incur a penalty based on the tax due. There are also more strict rules for accounting and penalties for late returns.

Allowable expenses

The performer has many facets to their discipline. The descriptions of the various expense headings can be modified according to the role it plays in the performer’s repertoire. One is restricted somewhat by the all-embracing interpretation that the taxman puts upon his own definitions of what expenses can be claimed. The legal mantra is that expenses claimed are to be “wholly and exclusively incurred in the performance of the business”, but this is not always clear-cut.

Broadly speaking, everything a performer does can be related to their work. For example, the taxman would not generally allow clothing as an expense, but if an actor were to buy clothing for a particular performance or for rehearsals then this expenditure would be allowable. Alternatively, if a performer were required to attend a film premiere where they are likely to be photographed for publicity purposes, the outfit they bought for that occasion could also be allowable. However, the claiming of expenditure needs to be done carefully and not abused. Over-claiming may lead to problems later on, if the taxman were to open an investigation. 

 

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