Artquest

Accountants can help you prepare your taxable accounts for HMRC when you need to pay tax, but for general advice on tax and accounts, contact your local HMRC office - details of all HMRC tax and specialist advice offices can be found on their website.

Under the requirements of self-assessment it is a legal requirement to keep records of your income and expenditure when not a full-time employee. For instance, an artist can have a part-time job and be self-employed as well.

If you are considering becoming self-employed but are not sure of the legal, tax and business implications, or simply need the practical steps to get there, see our article Seven Steps to Self Employment.

There are many issues concerned with taxation, employment laws and liability that artists' need to be aware about. The vast majority of artists do not only rely on sales of their work as income, rather on short-term contracts to take part in residencies and workshops. Organisations cannot employ artists on casual short-term contracts unless you have a Unique Taxpayer Reference or UTR (the self-employment reference number formerly known as 'schedule D') and a National Insurance (NI) number. Without these numbers it is impossible now to bid or apply for any short-term paid opportunity.

It is beneficial and advisable for artists to be aware of the benefits of self-employment as it is often the only viable option for practising artists. There are a large number of expenses that can be set against tax payments as well as new tax benefits for artists with disabilities and artists who have families to support. In addition to this, there is an array of business support networks and funding initiatives in London and nationally to assist artists and creative people into business.

Grants and Tax

A grant is non-taxable if it is "in respect of training schemes or to enable artists to devote time to research and development". All other grants are taxable. This is per the 1979 agreement on arts grants between the Arts Council and HMRC (see full text below). Hence, if a grant offer letter is framed in non-taxable terms, this will mean that the recipient (if an individual - different rules apply to companies) will not have to pay tax on the grant.

More information can be found in the a-n article on Tax and NI.

Arts Council of England: Taxable Status of Grants

Arts Council England reached agreement with HMRC in August 1979 regarding the taxable status of the awards, grants and bursaries which are made 10 artists, writers, photographers, musicians and other performing artists. The Council had introduced many new schemes for assisting creative artists over the previous ten years, and this had lead to increasing difficulties in the application of a previous understanding reached between the Council and HMRC in 1968. The following notes arc intended to clarify, for tax purposes, the treatment or the grant now offered.

The agreement, which applies to Arts Council schemes and not to those operated by the Scottish and Welsh Arts Council's and the Regional Arts Associations, seeks to clarify the taxability of the Council's awards and bursaries within the normal tax laws governing all United Kingdom residents. It makes no reference to the treatment of allowable expenses or existing statutory provisions for creative artists to spread earnings over a specific period of years. Furthermore, it should be emphasised that the individual's right of appeal against an assessment to tax on an award, grant, or bursary remains unaffected. Equally, HMRC is not legally bound by the agreement, and has the right, on investigation, to raise assessments as it sees fit.

Arts Council awards and grants fall into two broad categories. In the first place, awards in respect of training schemes or to enable artists to devote time to research and development will be non-taxable. Grants offered in respect of specific non-training projects will be taxable. In these cases, a return of work in some form is assumed in the application for Arts Council funds and in the subsequent execution of the project. This situation applies equally where the work is undertaken for the individual's own benefit or under contract with a third party. In certain ircumstances a grant may include taxable and non-taxable elements.

Under the agreement with HMRC, therefore, the grant now offered is deemed to be taxable in accordance with the general principles of Income tax law governing income arising from the exercise of a trade, profession or vocation. The above arrangements will be followed by HMRC, as long as the law remains as it is, in settlement of current appeals and in cases involving awards for future assessments. For its part, the Council has agreed to submit to HMRC each year details of the recipients of its awards, bursaries and grants. Inspectors of Taxes throughout the country have been informed of the terms of the agreement, and this should facilitate their task of assessment and enable consistent treatment to be applied to recipients of Arts Council funds.

Pensions

Artists and craftspeople often have difficulty finding pension advice and pension plans. The Art Pension Trust (APT) has been set up specifically to offer practitioners pensions.  There is also an article on pensions for artists on the a-n site.

 

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