Stop Stalling Your Tax Affairs
For those of you who don’t know, I am a tax partner by day and a musician at weekends. I love both my jobs with equal measure and since the lifting of lockdown, it’s been great to get out and start playing live again.
The music scene in Essex is like one big extended family. I wouldn’t say that everyone knows everyone, but it’s not far away from that. The chances are that if I walked into a pub in Essex and a live band was playing, then I would know at least one person on stage. It’s also great to see musician friends that come to see us at venues and to see them listening intently for any mistakes but also appreciating the musicianship and the party atmosphere.
A few weeks ago my band was playing at a well-known music venue in Essex when I bumped into a musician friend of mine. I was surprised to see him as he’s in a busy working band himself, but he told me he had a night off so he thought he’d come down and watch us. I had an hour or so before we were due to start so we had a good catch up about bands and music stuff, and then he asked me if we could talk about tax for a minute. I groaned inwardly because these conversations never bode well, and I do try and keep my day job away from live music events. Most of my musician friends know about the day job, and in truth, I’m always happy to help, although I’d rather speak to them during the day when I’m in the office than 30 minutes before going on stage to play.
My friend went on to tell me that his tax affairs had gotten into a bit of a mess. He is registered for self-assessment but hadn’t completed tax returns for a few years because of a few personal issues. As soon as he started to receive late filing penalties he began panicking and did the proverbial ostrich. For those of you who read my blogs, you will be aware that I may occasionally “bash” HMRC when they get things wrong but that’s normally connected to inquiry cases when the Inspector might get a bit over-zealous. In the main, HMRC is a professional and helpful organisation that recognises that there are times when people fall behind in their tax affairs. I told my friend to get his records together and come and see me the following week at our offices in South Woodford, Essex.
We had the meeting earlier this week and it’s clear that my friend has actually made a loss in the last two years. He was genuinely surprised and didn’t know that he could claim for business travel costs, rehearsal fees, telephone costs and various repairs to his guitars and amps. He’d also had to buy and replace some music equipment that would qualify for the Annual Investment Allowance. At this point, I should say that there is always a need to consider whether a business loss is commercial for tax purposes, but in this case, the loss is completely genuine. My friend plays on a regular basis and has extensive social media coverage together with a well-designed website. It is more than possible that HMRC would look to challenge anyone who continuously makes losses from a business venture, particularly if those losses are set against PAYE income and result in a tax repayment so this is something to bear in mind.
The point of this month's blog is to say that getting your tax affairs up to date isn’t as scary as you might think. In the case of my friend, we should have the outstanding returns ready to file in early January and we can then appeal against the late filing penalties based on his personal circumstances. He will receive a repayment of tax after offsetting his losses against his PAYE income and can concentrate on gigging without the worry of thinking he’s in HMRC’s bad books.
If you have any tax inquiry's you would like to talk to me about, feel free to contact me at firstname.lastname@example.org