Tax Time Again, but what can I claim as an expense?
Taxes and actors tend not to be a happy mix. Tax and the administration of the business of being an actor is often the last of their concerns but can be the first thing on their worry list.
A professional performer needs to keep proper accounting records as these contain the information required for tax returns. HMRC can request to inspect records so it is best to keep up to date with it all in an ongoing basis rather than just throwing it at somebody a few days before the deadline. These records should include the details of expenses incurred that are tax deductible.
Claimable expenses are a question that comes up a lot of the time between actors, performers, musicians and others of a creative nature. Asking each other what they put through as expenses, proportions of costs that are taken, and in some cases what income they say should not be included. Talk in the green room or even on some social media sites are the equivalents of ‘the man in the pub told me’ stories. When I hear this, my eyes drop and my head falls into my hands. Accountants may seem like expensive beasts, but getting one that knows your industry well, gives the long term gain is that they can keep you on the straight and narrow with you not claiming things that are not allowed and to make you think about things you may not have realised could be claimable.
The law states that expenses claimed are to be ‘wholly and exclusively incurred in the performance of the business’, but it is not always so clear cut. Many items of expenditure could be claimed as ‘wholly and exclusively’, but it should be used with care and not abused. Over claiming can lead to problems later on if there is an inspection by the taxman and keeping paperwork is key to supporting any claims.
There are some obvious expenses that you should be claiming for, and these are the costs that arise directly from singing activities:
- Travel to get to the rehearsal venue & performance location by public transport;
- Agent fees (& their VAT charges) which are deducted from your gross fee;
- Music & scripts purchased in order to learn or sing the role;
- Recordings purchased count as research, so the DVD of Othello would be allowable for a classical actor, but the DVD of Pink Floyd greatest hits would not be as it is out of the genre of your business;
- Netflix subscriptions may be classed as research along with any subscription digital TV for your area of work. Sky Arts used to be subscription based (used with care);
- Headshots & show reals which contribute to marketing;
- Subscriptions to unions such as Equity or BECTU;
- Subscriptions to audition websites such as Casting Call Pro;
- Print, postage & stationery;
- Website costs & other publicity you may do;
- Acting & coaching lessons and potentially singing & dance classes if needed for specific roles or audition.
However, there are areas that need work and knowledge to know what you are doing:
- Clothing – Only items that are specific costume are allowable, and make sure you don’t wear them to the venue. General clothing because you are in the public eye, or for rehearsals etc are not allowable as they do not fit with wholly & exclusively rules. You need to wear something to the audition for decency & warmth. I always advise people to get a photo of themselves wearing the outfit in the place it was bought for (that red carpet awards ceremony), and if you use to the 25 wedding anniversary 4 months later, it is incidental use.
- Personal grooming is another area where people fall foul of the rules. If you need to be blonde for a role and you are not, then in order to perform the role, the hairdresser trip will be allowable. Regular grooming of say haircuts every 6 weeks would not be allowable, or the skin care & beauty products. If you buy stage make up for stage, then that is allowable.
- Car costs v mileage – it is one or the other, and once you have made the choice one year, you need to stick to it unless there is a change of vehicle. Whichever method is selected, you need to record your mileage as well as the start & end mileage for your tax year. You should not turn round and say, oh, it’s about 25% business use. HMRC & accounting records will need to be in place. But don’t panic, if you have the detailed proof for one year and things are similar the next year, keep the proof and then apply that percentage.
- Subsistence – don’t get me started. Yes, you need to have receipts for meals you buy whilst you are away from your business base (usually your home), but you need to be at least 10 miles away and be gone for a reasonable amount of time. The cost should be similar to what you would normally spend on the meal at that time of day. If you would normally grab some soup and a sandwich, then that is what you would have as claimable subsistence. You can’t just rock up to the local hotel for a three course meal and wine.
- Health is an issue. If you were a violinist and had to buy strings and rehair a bow, then that would be an allowable cost. As singers, if something goes a bit array with a cold or chest infection, body maintenance and cold cures are not an allowable expense, including neck massages etc. It is not wholly and exclusively for the singing business as you benefit personally from getting rid of a cold. It’s the same with the gym. Even though we need to keep fit to be able to sing the way we do, gym membership is not allowable as there are other alternatives. Sorry.
- Mobile phone & internet. Technically it is the cost of the calls and the increase in costs of using your phone & internet as part of your business as against what they were without the business use. In reality, we do put forward our best guess as proportions here, but you still may get questions on it.
- You can claim a working from home allowance. I won’t go into it here as it can get complicated. There are more details in my downloadable white paper.
This is not an exhaustive list. There are plenty more costs that are allowable, and ones that aren’t.
Another thing to look out for is if you are performing with a group of actors (for example corporate role play), you are the main organiser and the venue/organiser pays you, the full income is yours on your tax return. Should you pay other actors a share of the fee, then this is an allowable cost, but either get an invoice from them, or get them to sign a receipt.
Finally, for the moment, if you are performing abroad and the promoter deducts withholding tax, this is treated in a separate area of the tax return. The income is declared in full, but you may be able to use the tax paid to offset UK tax due. That is a different blog post, or something I keep up my sleeve for my clients!
If you would like to get a copy of the white paper, please go to www.performanceaccountancy.co.uk/actors and scroll to the bottom where you will find a sign up box. If all goes well, you’ll get an email with the link inside – but check your spam or other folders as it may sneak into there.
Louise Herrington BA(hons), FCA