Creative Artists Averaging Relief – Can you draw better than me?

Just like his old man Jabo (#1 Son) loves his tech.  Even though he is only two and a half he has a fundamental grasp of how both my (I have to keep reminding him of this fact) iPhone and iPad works.  He loves to open not only his apps but also mine.  I found him giggling away to himself the other day on a long forgotten game.

You might recall the phenomenon (do,do,do, do, do) of draw something resulted in everyone becoming an artist overnight. Every two seconds my iPhone was informing me that one of my friends had created the next Damian Hirst, which to be honest were just as controversially pants as his blue skull paintings.

Thankfully the general population came to their senses pretty quickly and decided that such games should be left to family christmas parties.  A fact that Zynga, the company who bought the game from OMGPOP after six weeks for $200m, probably weren’t all that happy about.

Jabo does seem to have more artistic flair than me but to be fair he is practicing a contemparary style at the moment.  His current influences include Banksy.  Mrs TTF wasn’t too thrilled about this especially as she had to wash crayon off the white walls of our kitchen.

Now you might think that Jabo has created the above piece but in fact it was “painted” by my own fair hand for your critic. Most of you will see that my creative juices stop at painting by numbers.  Unfortunately my vocal talents are non-existent as well.  Numbers are more my medium but they don’t look pretty on the wall or make great lyrics (Sorry Prince but 1999 is so last century).

So if you take me out of the equation can we combine tax and the arts?

The Tax Bit

The life of an artist is a constant up and down. You can land a commission or book deal and make a fortune one year but not make a penny the next. HMRC recognise this problem and have therefore introduced Creative Artists Averaging Relief.

The Basics

The relief effectively lets an artist average their earnings over two tax years. The advantage of this is if you pay tax at different rates for one year compared to the next you can shift income between years and pay less tax. e.g. If you earn £10k one year and £50k the next you can claim to have £30k taxed in each year thus saving circa £2,000 in tax.

Who qualifies?

A trade person who derives profits from creative works created by them personally or by a partnership and are chargeable as trading income will qualify.  Generally these include:

  • Literary
  • Dramatic
  • Musical
  • Artistic

Where the intellectual property belongs to the creator and is protected by law.  Unfortunately it does not relate to works of crafts such as furniture makers.  Companies or work created by employees does not qualify either.  So if you fall under the above check whether you are entitled to the relief.

As always there are a few more rules but as long as the difference is more than 30% of the higher amount and it is your first year of averaging you should be ok.  As always check with a chartered tax advisor to ensure your personal circumstances meet the requirements.

I’m off to search YouTube to find the muppets and Sandra Bullock singing that song….phenomenon (do,do,do, do, do)..admit it your singing it too….

By Peter Cross

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