Income from Writing - Your Tax questions answered! Page 2

Quote: David Chapman @ April 30 2008, 11:10 PM BST

What happens if "other income" starts becoming regular?

When do you have to start declaring?

With Newsrevue you just get a cheque - no paperwork.

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YOu still need to declare it - its just that if its only the odd £50 you can do so in a simple way and not bother registering as self employed.

You dont need any paperwork, get a sheet of A4 and just write down what you get! but dont think that just because its only £50 no one cares. Newsrevue list that payment their end as a business expense....as has been said, its not unheard off for HMRC to go track down the other end of that audit trail...you!

Quote: David Chapman @ April 30 2008, 11:10 PM BST

What happens if "other income" starts becoming regular?

When do you have to start declaring?

With Newsrevue you just get a cheque - no paperwork.

View original

When other income starts to become regular then HMRC could deem you to be trading. They can use guidance on something called the badges of trade. This looks at a persons ‘intention to make a profit’, ‘the frequency of transactions’, ‘the nature of your work’ and ‘the existence of similar trading activities or interests’.

You need to ask yourself – is writing a hobby and I get paid a bit here and there for the odd submission, OR is it my intention to make money from writing? Do I do the odd submission a year or am I knocking out skits and other material like there is no tomorrow?

Ringing HMRC is not a bad idea as they can obviously tell you what they want from you. They may say your activities are casual income and tax it in this fashion (as either one off or low occurrence) or they may deem you self employed and try and register you. It depends sometimes on the flavour of the month. At one point they wanted as many people as possible in self assessment. Then they turned around and decided they wanted to remove as many people as possible from self assessment.

A note here – HMRC have got their customers service skills finely tuned and the people you speak to can be friendly and helpful. They will call it as they see it with your affairs and be as helpful as they can in assisting you to stay on the straight and narrow. But do not forget that the intention of HM. Revenue & Customs is to maximise revenue for the treasury. They offer helpful factual guidance but they do not give tax advice.

Anyway, if you have received some income during the tax year then you can call a tax office and let them know. If you are employed, and it’s less then £2,500 they can put it on your PAYE coding. If not then they may ask you to fill out a tax return and assess it that way.

If it is deemed self employment then you will have to register within 3 months of the trade starting. You would also be required to pay Class 2 national insurance which is currently £2.30 a week. But there is an exemption which you can apply for if earnings are less than approx £4500.

I got £13 - and the other expected writing has come up against an obstacle - probably because it was crap!

Quote: David Chapman @ May 8 2008, 8:42 PM BST

I got £13 - and the other expected writing has come up against an obstacle - probably because it was crap!

View original

Declare it as crap then Dave. Then give 35% of your shit to the tax man. Send it by post.

Magazines will pay £50 just for a letter. Is it considered as income if you have a few letters printed?

What about printing £20 notes? Is that an income?

Quote: Up4it @ May 8 2008, 10:35 PM BST

Magazines will pay £50 just for a letter. Is it considered as income if you have a few letters printed?

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I would like to know the answer to that one please.

Also - what about competition prize money?

I've only just realised why you're called Loopey!

I am the slowest person IN THE WORLD.

shes a nagging ram

Quote: zooo @ May 19 2008, 9:32 PM BST

I've only just realised why you're called Loopey!

I am the slowest person IN THE WORLD.

View original

You win tonight's star prize - a star

Quote: Up4it @ May 8 2008, 10:35 PM BST

Magazines will pay £50 just for a letter. Is it considered as income if you have a few letters printed?

View original

I would say no. Having a letter printed and getting some cash for doing so is really akin to recieving a prize, and 'income from gaming' as it is termed, is tax free.

The line can be blurred however if you devote your time to getting letters published so as to get money from it. HMRC would most probably want a cut if you were essentially a 'professional letter writer'. This goes back to the badges of trade as mentioned above. What is your intention? a letter here and there or ten letters a day, every day?

Overall, if it is a bit of casual letter writing I wouldn't be too concerned about it.

Def.

Quote: Loopey @ May 19 2008, 9:24 PM BST

I would like to know the answer to that one please.

Also - what about competition prize money?

View original

Competition prize money is free of tax. It is termed 'income from gaming' in tax circles.

But, if you make it a profession ie gambler, then it could be considered income. HMRC leave all this deliberately vague because they want to be able to get as much tax as possible.

Entering a few competitions and winning a bit of prize money should not really be anything to worry about as long as it is casual. If you do it as part of your writers trade then it may be a different matter because you would be actively persuing income through your skills. Bah...I'm rambling now. Basically it is one thing to get prize money on an adhoc basis but if you are a writer trying to earn an income, and as well as writing stories, articles etc you dable with writing comps then I think HMRC would consider it part of your trade.

Def.

Quote: Deferenz @ May 21 2008, 4:48 PM BST

But, if you make it a profession ie gambler, then it could be considered income.

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very unlikely for most though. i played professional poker for a while and won enough to put me well into higher rate tax and beyond. i was advised that i was fine although if i earned money from tv appearances then they could argue i was acting as a trade and tax that - in the event i was only on tv once before i quit. the only grey area was for players that ran home games as they were deemed to be organising and therefore trading in the gambling as opposed to me who was habitual but not actually trading.....the bigger issue with those home games was some thugs turning up and robbing the 20 blokes who brought god knows how much for a nights playing!

as always HMRC were very helpful and aimed to provide me good advice and not just tax whatever they could.

Quote: Deferenz @ May 21 2008, 4:48 PM BST

Overall, if it is a bit of casual letter writing I wouldn't be too concerned about it.

View original

I was directed to this summary which, although relating to gambling, helps with the difference between the odd letter and doing it for a trade.

"There is no tax on a habit. I do not think ''habitual'' or even ''systematic'' fully describes what is essential in the phrase ''trade, adventure, profession or vocation"

I dont think you could argue you were a habitual letter writer

Brilliant thread, Deferenz. Thank you.

I have a question about VAT. A pro writer/performer told me that he has to add VAT to the invoices he gives to companies who employ him. The company pays him his fee plus the VAT, and he passes the VAT on to the government.

And the company then claims the VAT back from the government.

Is this true; and if so, is there any way around this absurd and tedious process that makes more work for individuals and gains the government absolutely nothing?

Quote: Mike Greybloke @ May 27 2008, 9:06 AM BST

Brilliant thread, Deferenz. Thank you.

I have a question about VAT. A pro writer/performer told me that he has to add VAT to the invoices he gives to companies who employ him. The company pays him his fee plus the VAT, and he passes the VAT on to the government.

And the company then claims the VAT back from the government.

Is this true; and if so, is there any way around this absurd and tedious process that makes more work for individuals and gains the government absolutely nothing?

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If you are a self employed entertainer/writer then the registration threshold for VAT is £67,000. If you have earnings of this amount in any revolving 12 month period then you are required to register with HMRC. You then act as a collector and payer of VAT and need to add VAT to your invoices. Likewise you are allowed to claim VAT on your purchases. The difference is then paid over to HMRC. It is only in certain situations that you would get a VAT refund and that is when you purchase VAT is inexcess of your sales VAT. Generally speaking, many more people pay over VAT than reclaim it.

The only way to avoid VAT is to not earn up to the threshold or to become employed (as then the company is responsible for VAT).

Def.