Tax Allowance

[Guest McBass]

I just bought a new bass, can i claim the full amount as an expense?

[DJpullchord]

If you use it solely  for work, yes.

[ambient]

I believe so, best to ask an accountant, I think you're allowed so much a year. I claimed my MMus fees that I was paying myself two years ago. I claim travelling, and expenses associated with releasing my music etc.

[leftybassman392]

This  should help.

[Guest McBass]

Thank you

5 minutes ago, leftybassman392 said:

This  should help.

Thank you.

[Nicko]

13 hours ago, McBass said:

I just bought a new bass, can i claim the full amount as an expense?

As long as you are registered as a business or as a sole trader yes but that would also mean declaring your earnings so it only makes sense if youare a full time musician.  You can also claim mileage, new strings, food while working, hotel bills and so on. 

[Guest McBass]

I am full time indeed, i suppose i could have rang my accountant but i'm sure they would have had the clock running for the duration of the phone call.

[Happy Jack]

I haven't read Lefty's link so I may be doubling up here, but you can only claim the COST of the bass, not its price.

If you buy a £4000 Wal that does not mean you can claim £4000 against tax.

If you can show that your Wal is depreciating in value (i.e. it is worth less each year) then you can claim for the amount of depreciation you have suffered.

If your £4000 Wal is still worth £4000 a year later then you have incurred no COST and cannot claim anything. 

Some high-end basses and many vintage basses are not a COST, they are an investment. You can turn them back into cash later ...

[Lee-Man]

Wouldn't a new bass come under annual investment allowance (AIA)? Also, isn't it a depreciating asset until/if you sell (if you go for depreciation instead of AIA)? Then you'd need to declare the difference (loss/profit) in the tax year you sold it? If you intend to buy then sell later for profit then it would be treated as an investment/stock and you may treat it differently. 

Regardless, I think you should seek professional assistance with this. Not suggesting anyone is wrong. Its just your better getting qualified advice in such matters as getting it wrong will cost you in the pocket. I use an accountant, safer that way. 

Edited January 12, 2018 by Lee-Man

[DJpullchord]

Capital expenditure.

[Guest McBass]

Quick call to my accountant, i can claim 100%. Thanks for all your help guys.

[Lee-Man]

This may help: https://www.musiciansunion.org.uk/Home/Advice/Your-Career/Tax/Capital-Allowances

[leftybassman392]

17 minutes ago, Lee-Man said:

Regardless, I think you should seek professional assistance with this. Not suggesting anyone is wrong. Its just your better getting qualified advice in such matters as getting it wrong will cost you in the pocket. I use an accountant, safer that way. 

Not sure he'll thank me for saying this, but Jack is an accountant.

I'm not, but I am good at Maths and did do my own accounts as a self-employed musician for around 15 years.

[Lee-Man]

5 minutes ago, leftybassman392 said:

Not sure he'll thank me for saying this, but Jack is an accountant.

I'm not, but I am good at Maths and did do my own accounts as a self-employed musician for around 15 years.

Thats cool. And I'm not saying he's wrong (as I said in my post). I do still stand my advice that seeking professional advice is best.

Jack obviously knows his onions. But, there will be other advice on this forum that is less qualified (such as mine for example and some of the other posts). As there is no way of differentiating between posts seeking advice directly from a qualified professional is prob the best thing to do.  

[Happy Jack]

1 hour ago, McBass said:

Quick call to my accountant, i can claim 100%. Thanks for all your help guys.

 

1 hour ago, leftybassman392 said:

Not sure he'll thank me for saying this, but Jack is an accountant.

I'm not, but I am good at Maths and did do my own accounts as a self-employed musician for around 15 years.

 

1 hour ago, Lee-Man said:

Thats cool. And I'm not saying he's wrong (as I said in my post). I do still stand my advice that seeking professional advice is best.

Jack obviously knows his onions. But, there will be other advice on this forum that is less qualified (such as mine for example and some of the other posts). As there is no way of differentiating between posts seeking advice directly from a qualified professional is prob the best thing to do.  

In this scenario, McBass should certainly go with what his accountant has told him, if only because if it all goes horribly wrong then he can claim against the guy's Professional Indemnity insurance. Sad, but true.

Meanwhile, and I ask this entirely hypothetical question in a pure spirit of enquiry, were one to claim £5000 against income tax because one had just bought a 1965 Fender Precision, then one would avoid paying at the very least £1000 in income tax.

Were one then to sell said 1965 Fender Precision for £6000 (because these things tend to appreciate over time) would one declare that as a capital gain and pay capital gains tax on it? I'm guessing not. 

Were one then to sell said 1965 Fender Precision for £5000 (because these things tend not to appreciate as much as one might like) would one reverse the previous claim against income tax and pay the at least £1000 income tax on it? I'm guessing not. 

So that's tax evasion then.

Just saying ...

I don't work for HMRC, and I have absolutely no 'moral stance' on this. But sometimes it's worth actually thinking through these scenarios.

 

[Al Krow]

6 hours ago, Happy Jack said:

I haven't read Lefty's link so I may be doubling up here, but you can only claim the COST of the bass, not its price.

If you buy a £4000 Wal that does not mean you can claim £4000 against tax.

If you can show that your Wal is depreciating in value (i.e. it is worth less each year) then you can claim for the amount of depreciation you have suffered.

If your £4000 Wal is still worth £4000 a year later then you have incurred no COST and cannot claim anything. 

Some high-end basses and many vintage basses are not a COST, they are an investment. You can turn them back into cash later ...

Jack - unfortunately I think this is completely wrong, sorry!  Ok here's a bit of detail to hopefully clear up the confusion on this:

Are your music activities a 'commercial business' / 'profession'?

Starting point is that you need to be doing your music as a business with a view to making a profit (whether or not you actually make a profit is another matter!). If it is just a perennial loss making hobby then you won't get a deduction and nor do you need to worry about including your music activities in your tax return.

Expenses

Any income expenses that are 'wholly and exclusively' relating to your music business can be deducted - ambient gave a couple of examples where he was allowed to validly deduct costs in relation to his professional music activities.

Capital expenses

Depreciation (which Jack mentions above) is a specifically disallowed expense (it has to be 'added back' for tax purposes from your accounting profits)

What you can do is claim 'capital allowances' which is the tax equivalent of depreciation. There is currently an 'annual investment allowance' which allows a 100% deduction for the cost of capital items. The AIA limit is currently £200,000.

Taking the example of a Wal bought for £4,000, yes you can in principle deduct the whole cost of the Wal and set it off against your other music business income. If this results in a tax loss for your music business then the loss can be set against income from other sources in the same tax year (or carried forward to offset against your music business income, only, in future years).

Subsequent sales of capital items

If you sell your Wal down the line:

(i) for less than you paid for it, you need to include the sale price as income (i.e. reversing some / all of the capital allowances previously claimed).

(ii) at a profit, then you would reverse out (i.e. include as income) the whole £4,000 of capital allowances claimed. You will also have a capital gain, although there are various CGT allowances and exemptions that should almost certainly mean you don't have any additional CGT to pay.

You should however be able to deduct the cost of your replacement gear in full (assuming that the annual investment allowance is still available) in the tax year you buy it.

Hope that helps!

Disclaimer: the above note has been provided for general information purposes only for my fellow BCers and specific advice relating to your circumstances should be sought from your accountant.

Edited January 12, 2018 by Al Krow

[lurksalot]

41 minutes ago, Happy Jack said:

 

 

In this scenario, McBass should certainly go with what his accountant has told him, if only because if it all goes horribly wrong then he can claim against the guy's Professional Indemnity insurance. Sad, but true.

Meanwhile, and I ask this entirely hypothetical question in a pure spirit of enquiry, were one to claim £5000 against income tax because one had just bought a 1965 Fender Precision, then one would avoid paying at the very least £1000 in income tax.

Were one then to sell said 1965 Fender Precision for £6000 (because these things tend to appreciate over time) would one declare that as a capital gain and pay capital gains tax on it? I'm guessing not. 

Were one then to sell said 1965 Fender Precision for £5000 (because these things tend not to appreciate as much as one might like) would one reverse the previous claim against income tax and pay the at least £1000 income tax on it? I'm guessing not. 

So that's tax evasion then.

Just saying ...

I don't work for HMRC, and I have absolutely no 'moral stance' on this. But sometimes it's worth actually thinking through these scenarios.

 

I think I might find that the bass I bought and claimed depreciation on was probably sold for scrap once totally valueless . 

What the Mrs would want with old bass like that I have no idea .  

[Lee-Man]

1 hour ago, Happy Jack said:

 

 

In this scenario, McBass should certainly go with what his accountant has told him, if only because if it all goes horribly wrong then he can claim against the guy's Professional Indemnity insurance. Sad, but true.

Meanwhile, and I ask this entirely hypothetical question in a pure spirit of enquiry, were one to claim £5000 against income tax because one had just bought a 1965 Fender Precision, then one would avoid paying at the very least £1000 in income tax.

Were one then to sell said 1965 Fender Precision for £6000 (because these things tend to appreciate over time) would one declare that as a capital gain and pay capital gains tax on it? I'm guessing not. 

Were one then to sell said 1965 Fender Precision for £5000 (because these things tend not to appreciate as much as one might like) would one reverse the previous claim against income tax and pay the at least £1000 income tax on it? I'm guessing not. 

So that's tax evasion then.

Just saying ...

I don't work for HMRC, and I have absolutely no 'moral stance' on this. But sometimes it's worth actually thinking through these scenarios.

 

I would reverse the previous claim and pay the tax based on the profit I'd made. I don't think I'm smart enough to evade the tax man. Plus I believe in a social system where you give what you should and take what you need. Evading HMRC doesn't sit well with me. However, I also appreciate that not everyone shares my thoughts on this. But then, thats up to them. 

Things get rather muddy if I brought said bass new in 1965 (lets say for equivalent £1k). Claimed WDA as it depreciated. Retired in 2013 and sold bass for £5k as I no longer needed it. I see how that would work in principle, but is there some kind of time limit placed on this or is it a grey area yet to be tested (I appreciate this wouldn't work for other trades)? 

[leftybassman392]

21 minutes ago, Lee-Man said:

Things get rather muddy if I brought said bass new in 1965 (lets say for equivalent £1k). Claimed WDA as it depreciated. Retired in 2013 and sold bass for £5k as I no longer needed it. I see how that would work in principle, but is there some kind of time limit placed on this or is it a grey area yet to be tested (I appreciate this wouldn't work for other trades)? 

Based on my own experience, if you are still in possession of your working equipment when you close the business then that equipment reverts to your private ownership and AFAIK you are then free to dispose of it as you see fit. Bit of a special case I know, but there it is for what it may be worth. I should add that I operated as a self-employed sole trader.

Edited January 12, 2018 by leftybassman392
Additional content.

[Nicko]

3 hours ago, Happy Jack said:

 

 

In this scenario, McBass should certainly go with what his accountant has told him, if only because if it all goes horribly wrong then he can claim against the guy's Professional Indemnity insurance. Sad, but true.

Meanwhile, and I ask this entirely hypothetical question in a pure spirit of enquiry, were one to claim £5000 against income tax because one had just bought a 1965 Fender Precision, then one would avoid paying at the very least £1000 in income tax.

Were one then to sell said 1965 Fender Precision for £6000 (because these things tend to appreciate over time) would one declare that as a capital gain and pay capital gains tax on it? I'm guessing not. 

Were one then to sell said 1965 Fender Precision for £5000 (because these things tend not to appreciate as much as one might like) would one reverse the previous claim against income tax and pay the at least £1000 income tax on it? I'm guessing not. 

So that's tax evasion then.

Just saying ...

I don't work for HMRC, and I have absolutely no 'moral stance' on this. But sometimes it's worth actually thinking through these scenarios.

 

I'm nt an accountant but it was my understanding that capital assets are generally written down over a few years, so if you but a car used for work it is declared in year 1 and a few years later is assumed to have no value.  When /whether you sell it on at a profit is not tax avoidance in this scenario.

[Happy Jack]

It's OK ... I'll have my people talk to your people. 

[Guest McBass]

6 hours ago, Happy Jack said:

 

 

In this scenario, McBass should certainly go with what his accountant has told him, if only because if it all goes horribly wrong then he can claim against the guy's Professional Indemnity insurance. Sad, but true.

They've been my accountant for 10 years, not one person but a company.

 

[taunton-hobbit]

If your accountant is one who charges everytime you call -CHANGE HIM

There are plenty that do'nt.

 

[Guest McBass]

10 minutes ago, taunton-hobbit said:

If your accountant is one who charges everytime you call -CHANGE HIM

There are plenty that do'nt.

 

Was a tongue in cheek comment, didn't you see the smiley face?  

[SpondonBassed]

20 hours ago, McBass said:

I am full time indeed, i suppose i could have rang my accountant but i'm sure they would have had the clock running for the duration of the phone call.

Yup.

I had a quote for seven hundred and fifty shopping trolley tokens from a 'friendly' accountant to sort out my mum's and my tax returns after they went pear shaped with the online service.  As I was facing fines of more than a K from HMRC, it was almost an attractive proposition.

I thought it was a lot of money for very little really as all he was going to do was make me fill out more forms than HMRC do!  He had the barefaced cheek to tell me that he would use software to generate my return.  My affairs are nowhere near complicated enough to need software to sort them out.  I resented the notion of paying for his software licence fees so I told him I'd get back to him.

I was not going to do all the filing then watch him sit back, hit 'Enter', then charge me hundreds of pounds for less than an hour's work on his part.

When it came to, HMRC were very helpful and surprisingly understanding.  I was able to have a face to face interview during which all the late returns were sorted and the fines refunded.

I don't like their website though.  Complicated and full of Beta pages every time I used it.  I no longer do online returns.

That bloke who used to claim on telly that 'Tax needn't be taxing' was a proper berk for saying so.  I haven't earned enough to owe tax for over ten years now and it taxes the stuffing out of me just to tell HMRC that!