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Musicians tax breaks
Will Scottish entertainers make more money with proposed musicians tax breaks?
One of the consequences of the Scottish Independence Referendum is a “Command Paper” to be produced by Lord Smith of Kelvin and the Scottish Devolution Commission. Among the proposals being put to the commission is copying an idea from Ireland to give artists and musicians tax breaks.
Special treatment for artists
The Republic of Ireland has given artists a tax exemption since 1969 which means the profits from the sale of works do not attract income tax up to a maximum of €40,000, or £31,500. Everyone agrees that the tax system should be simplified – except of course if it the complication benefits you. Is this a valid sign of support for artists or will everyone want “special treatment”?
Alterledger can help
Why wait for the law to favour your industry? Contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and claim more expenses to cut your tax bill.
Is my hobby a business?
The criteria used to assess if an activity is a hobby or a business are:
- The size and commerciality of the activity.
- The frequency of the activity and transactions
- The application of business principles.
- Whether there is a genuine profit motive.
- The amount of time devoted to the activities.
- The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).
HMRC have some great examples to help you decided, for example
Gail is a full-time employee working for a stationery company. She pays her PAYE tax on this employment every month.
In her free time Gail makes cushions and uses most of them in her home. Occasionally she sells them to friends and work colleagues for an amount that just covers the cost of materials of £15. Sometimes she makes a loss. Any money she does make goes towards her holiday fund.
She decides to make extra cash by selling cushions on an Internet auction site and starts auctioning three or four to see how they go. They all sell for more than £50, a profit of at least £35 each.
She uses this money to buy more materials and within a month she is selling around ten cushions a week, always at a profit, and is considering setting up her own website.
Gail’s initial sales of cushions to friends are not classed as trading. It lacks commerciality and she does not set out to make a profit. The occasional sales are a by-product of her hobby. Once she begins to auction her cushions, she has moved into the realms of commerciality.
She is systematically selling her goods to make a profit. She will need to inform HMRC about her trade, and keep records of all her transactions. On the level of sales shown in the example the potential turnover of around £26,000 is well below the VAT annual threshold so Gail does not need to register for VAT.
You can find more examples at HMRC
Many traders start off in a small way and don’t realise that they need to register with HMRC, they assume their activity will be treated as a hobby, but things can grow quickly.
You should register as Self Employed as soon as your hobby becomes a commercial venture, even if you are losing money!
If you don’t register, HMRC will be looking for you and if you have an online business it won’t be hard for them to find you.
Ebay say they work ‘hard to ensure that businesses that trade on the platform are aware of their tax obligations’.
It added: ‘We do not hesitate to share information with government agencies should there be evidence of wrongdoing. We require all sellers trading as a business on eBay to register for a business account.’
What flavour is your Accountant?
Thanks to http://www.freedigitalphotos.net
One of the great joys of working as a ‘CIMA MiP’ (“Chartered Institute of Management Accountants, Member in Pratice”) is that we are generally dealing with ‘small’ and ‘micro’ client firms (micro defined by EU regulations as firms with less than 10 employees/ £2m turnover; small defined as firms with less than 50 employees/ £10m turnover) and that we become involved in an enormous breadth and depth of subjects.
One of the less welcome challenges however is that as far as most small and micro business owners and managers are concerned, one accountant is the same as any other and this includes the myriad unqualified accountants who practice their particular brand of accounting services at rock-bottom rates. Indeed it is rare that I have been asked whether I am a ‘qualified’ accountant, and is rarer still that I am asked what that qualification is (in fact I cannot ever recall being asked that question by a client). The client generally assumes that because one calls oneself an ‘accountant’ then one can ‘do accounts’ and that accountants are all the same.
We’re not.
My particular practice specialises in manufacturing clients and most new clients have come from existing client referrals. Fortunately I do not need to be a great sales person to convert a prospect into a new client when (a). there is a recommendation from an existing client and (b). we appear to ‘speak the same language’. Clients generally put this down to my having owned and run manufacturing firms and to some degree that is true, but is is also because of my CIMA training.
If you’re looking for year end accounts, audit, or tax computation then you will likely be talking to a ‘Certified Accountant’ or ‘Chartered Accountant’, but where they will be reporting back to you on how well (or otherwise) you did overall last year and what your tax liability is, the CIMA ‘Chartered Management Accountant’ will be working with you to establish what activities made money and why, and whether you can do more of it, and of course which did not and how to avoid this in future; indeed the focus is very much ‘future’ as much as ‘past’.
In terms of the client business, it’s not difficult to see that helping the client to understand their business is a valuable element in managing, changing, and improving the business, and this is something which CIMA qualified people have to offer any business, so it’s a great shame that Chartered Management Accountants tend to be employed by big businesses who understand the difference between the different accounting disciplines.
None of this is to say that a Certified Accountant or Chartered Accountant could never do what the Chartered Management Accountant does, but it is not what they have been trained to do and equally as a Chartered Management Accountant in practice for twenty-two years I provide a ‘full service’ including year end accounts and tax returns for my clients, albeit the main focus remains helping them to improve their business.
I would urge Chartered Management Accountants to seriously consider a career in the small and micro business sector which accounts for 99.3% of the 4.7 million businesses in the UK (source: BIS 2013) and 47% of private sector employment (source: FSB 2013) and which is a vital part of the UK economy: whether in practice servicing a number of clients, or a full-time employee of a particular firm, I am sure that you will find the experience very rewarding
I would equally urge owners and managers in that sector to become aware of the differences between the main accounting bodies and the relative strengths of each, and to be sure that whoever they engage with will meet the needs of their particular business.
Paul Driscoll is a Chairman of CIMA MiPs in South West England and South Wales, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and a number of manufacturing companies, and is a board level adviser to a variety of other businesses.
Minding your Ps and Qs
Running your own business can be the biggest thrill you will achieve in your working life, or the most stressful and demoralising experience you can imagine. On some days it is both!
However, I have come to realise from my own experience, from talking to business owners, and from gurus such as Ron Baker, Peter Thompson and Steven Covey, that running a successful business is all about minding your Ps and Qs.
Given the stresses involved in running your own business it is vital you are passionate about your product or service. Let’s face it, it is much easier to engage with potential customers if you can show passion for what you do.
Once you know what you want to do, you need to have a robust plan. We business owners are often knowledgeable about our product or service but avoid those business areas we struggle with – often marketing, sales or finance. The process of creating a business plan forces us to review ALL the areas of our business which are crucial to our future success.
We need to present ourselves to the market. If, like me you run a service lead business, one of the best ways to do this is to network. People buy from people they trust so you need to be out there meeting, and getting to know, local business owners.
Consulting professionals to help in areas you are not expert in is wise. Very few of us are instinctive business people and there will be one or two areas we struggle with. Interesting it is often more cost effective to get an expert in to do an efficient job than to try and do it ourselves.
To me a key element of a quality service is communication – this means listening and responding to clients’ concerns. Even if you sell a product there is a service element to what you do and this will be your contact with your customer.
Effective communication will allow you to qualify a potential client’s needs and what they particularly value. Having established value it should be fairly easy to give them a price.
To close, your business will not be measured by the outside world on what it is but on what people perceive it to be. So keep your ear to the ground and ensure peoples’ perception matches your reality.
Fiona 🙂
Is your business ignoring Mobile?
A OnePoll survey commissioned by AppsBuilder reveals that £52.6 billion of potential revenue to be gained via mobile is being ignored by over 3.2 million UK SMEs. It found that 65.8% of the nation’s 4.9 million SMEs don’t currently have a mobile presence, equating to potential lost revenues of £52.6 billion in the next 12 months alone. The number of consumers in the UK using mobile phones to access the internet has doubled over the past three years and about 5% of all UK retail sales come via mobile phones. (Law Donut)
Its not just about Apps, websites too need to be optimised…
With only 10% of the UK’s small and medium-sized enterprises (SMEs) having a mobile optimized website, businesses could be missing out on £77 billion in annual revenue a study has found. And only 13% of those without a mobile optimized site plan to have one by the end of 2014.
The survey, conducted by Impact Research for hibu, asked 900 UK SME owners and IT leaders about their companies’ websites, revenues and future plans for the mobile web. It showed that 45% of UK SMEs do not have a website, yet believe their annual revenue could rise by 5.4% if they had a website that was optimised for mobile transactions, equating to an average of £11,155 extra turnover annually.
I find it incredible that 45% of SME’s do not have a website? how will customers find them?
The days of looking yellow pages and printed directories are long gone, most people search google to find the goods and services they need.
steve@bicknells.net
How do you know if you are doing well or not?
Many business owners, especially if they are a sole trader, struggle to know whether they are doing well or not.
The reasons for this are as follows:
Firstly, many business owners do not have a plan for their business. This means that, even if they have up to date profitability figures in front of them, they don’t know if the figures are good or bad. It is only by having a robust plan, covering several years and based on your own goals, that you can judge whether your business will meet your goals, or not. A business which does not meet the owners’ goals is not doing well – however much profit it might be making.
Secondly, many business owners do not have up-to-date financial information. This means that even if they know their goals, they have no idea if they are meeting them. Some business owners keep a pretty close eye on sales/turnover but leave the rest to sort itself out. However, sales are just part of the picture. If you don’t control your costs or your cashflow, your business will struggle.
Thirdly, it is vital to know who’s definition of ‘doing well’ is important. For me, the only measure which is meaningful is YOURS. I see business owners struggling to match someone else’s ideal, rather than their own.
Finally, if you don’t know whether or not you are doing well, the chances are you will via to one extreme or the other. You will either believe you are doing far better than you are, or you will believe you are doing far worse. The first delusion will probably mean you come across quite unexpected problems with cash flow. The second will leave you feeling disillusioned and demotivated.
So, do yourself a favour and make sure you have a robust business plan, which you are updating with current financial figures. That way you will know for sure if you are doing well.
Fiona 🙂
Which is your team?
Well it’s all behind us now!
The World Cup with all its highs and lows is over and, as always, we find ourselves dissappointed at the results.
It occurs to me that this sporting event exemplifies many of the trials and tribulations businesses come across in trying to be successful. If you have a team full of players who are only interested in themselves as individuals, it is likely you will get poor results, even if the players seem to be very talented. However, if you have a team of players who are willing to sacrifice their personal status to further the team’s ambitions, the sum becomes greater than the parts and real magic can result.
Further, it is important that the team has a clear and common vision, which is driven through by the directors. If individuals in the team go in their own direction without reference to the vision, or ignore clear management guidance, the team as a whole will suffer.
So my advice is to look at your business and decide which team you would like to be.
Will your company resemble Brazil, Spain, or indeed England? Or will you be like Germany and hold the World Cup aloft?
Fiona 🙂
HMRC aims to raise further £5bn in tax revenue
Thanks to http://www.freedigitalphotos.net
Her Majesty’s Revenue & Customs (“HMRC”) are seeking new powers as follows:
1. Advance Payment – basically in any dispute between HMRC and a tax payer HMRC would be able to assess what tax they believe is due and require the tax payer to pay this as a sort of ‘refundable deposit’ until such time as the dispute is resolved through arbitration or court. Perhaps more importantly, if granted, these powers will be applied retrospectively.
Given that at the current time there are unresolved cases going back ten years or more and that once HMRC has the tax payers’ money there will be even less incentive for them to come to a resolution then this is essentially HMRC to act as judge, jury, and executioner. Isn’t this simply a ‘guilty until proven innocent’ treatment of tax payers?
2. Direct Debit – where HMRC believe that the tax payer owes them money then they will be able to simply take money directly from the tax payer’s bank account. As I understand it there will be further powers to obtain previous bank statements and this will no doubt lead to further tax investigations.
The legislation which will encapsulate these powers is currently going through Parliament, and despite opposition from lobby groups and committee members alike, HMRC seem intent upon pushing this legislation through with a view to achieving Royal ascent in mid July 2014.
Of course, should HMRC gain these powers they will hit the easy targets first i.e. those who have ‘played by the rules’ and properly disclosed everything through DOTAS, and those who operate proper business bank accounts, so it will do nothing to address those who have hidden their activities from HMRC and those who operate in the black ‘cash-in-hand’ economy.
Whilst the general public may have little sympathy for people who ‘don’t pay their fair share of tax’ (if there is such as thing – see Did Jimmy Carr just use the wrong vehicle?) we have to remember that tax avoidance is entirely legal as it simply takes the rules and regulations enacted in law and uses these to reduce a tax payer’s liability.
The new powers will do nothing to tackle tax evasion, which is illegal, and so it is no surprise that spokesmen for HMRC, and representatives for HM Government, have sought to blur the lines between legal avoidance and illegal evasion in recent times. We can be equally sure that HMRC will not be tackling the multi-nationals like Google and Starbucks who have made recent headlines with their tax affairs, and so it will (as ever) be small firms that will bear the brunt of any HMRC action.
What we shall no doubt see is an increase in non-DOTAS schemes being made available to tax payers by providers of such schemes, and I fear beyond that we shall see a rise in business insolvencies and loss of jobs, all of which will run contrary to HMRC’s aim to raise further tax revenues.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
Should I or shouldn’t I?
Having just organised the CIMA Members in Practise (MiP) two day annual conference – along with a great team – I thought it would be a good time to explore the theme of volunteering.
For most of us running our businesses is a fairly all consuming activity and we can generally fill every minute of our working day. This makes us feel that taking on any additional work as a volunteer would just be too much hassle.
However, I have found that unexpected dividends can come from doing that bit extra.
Firstly, I have been taken well out of my comfort zone. Accountants, even management ones, are not generally called upon to find great speakers on a limited budget, to fill a two day programme. We are not natural marketeers and struggle to ‘sell’ to anyone. But I have been forced to address these issues and conquer my natural tendency to avoid tasks I find difficult.
In the short, medium and long term this will stand me in very good stead when looking to grow my own business.
Secondly, I have been able to ‘give back’. When I started my businesses there were several key people without whose help my journey would have been much more tortuous. Top of the list of these key people were long standing MiPs whose insights helped me to make important short cuts.
Conference is a key way for new MiPs to take similar short cuts by getting the help of established members in practise and excellent CPD they may not have access to otherwise. So by being involved as a volunteer I feel I am thanking the guys who invested in me.
Finally, volunteering has helped me to make life-long friends with some really great people. I have got to know my fellow volunteers really well and feel I have broadened my support network in a way I would not have been able to do otherwise.
So if you have the opportunity to become involved – take it!!
🙂 Fiona
New Government Funding to help Women in Business
Last months ONS figures show more people are becoming self employed than ever before.
Budding female entrepreneurs are set to benefit from superfast broadband with a new £1m challenge fund, enabling them to work effectively, access new markets and grow their business online.
The fund will be part of the Government’s Superfast Broadband rollout and will help women take full advantage of all the opportunities superfast broadband can bring to business. There are 40 local broadband projects in England, already delivering the programme and they submitted bids to the £1m challenge fund in May 2014.
This forms part of help the Government is already providing to female entrepreneurs, which includes:
- £1.6 million to support women’s enterprise in rural areas;
- access to over 15,000 free business mentors; and
- from next year, the introduction of Tax Free Childcare will mean that, for the first time, many self-employed parents will have access to support with childcare costs.
Are we doing enough to help women in business?
steve@bicknells.net
Business Accountant 