LFB’s friendly accountant helps keep the Revenue at bay
Never tell your accountant something that may
provide him or her with any reason to believe you are dishonest:
that was the firm message that NUJ-friendly accountant Eric Longley
gave to the September meeting of London Freelance Branch. That
would expose you to the kind of treatment more normally reserved
for money-laundering Colombian drug barons.
Basically, he said, where a professional suspects a crime has been
committed or it is intended to commit a crime, they are bound by law
to make a report to the National Crime Intelligence Service. And they
are forbidden to tell you that they are doing this: the result
"will make the East German Stasi look like amateurs!"
On more mundane developments since the last Budget, Eric said that
incorporation - turning yourself into a company - was becoming less
and less attractive. The Inland Revenue is finding ways to nibble
away at any advantages. "Only do so if you are earning sufficient
income and well advised," he said.
And advice, nowadays, may mean talking to a lawyer rather than
an accountant, in situations where you may have transgressed the
letter of the (tax) law. Where previously the Inland Revenue would
quite possibly have settled for sorting out the position with an
agreed payment of tax due, court decisions are forcing it much
more towards prosecution.
Answering questions for members, Eric described the rather fluid
rules governing the assessment of whether or not you qualify as
self-employed. One significant factor is whether supervision of
your work puts you in what could be described as a master-servant
relationship. The most important indication that you are truly
self-employed, though, is your "right of substitution".
That is, you are clearly self-employed if you are contracted simply
to produce or edit words or pictures - rather than to be you in
person - and you can get someone else to do the work for you. It
is also important that you bear the risk of making a loss, for
example if your sub-contractor costs more than your client pays.
Eric reminded Branch members that where you are hired to work
shifts, and are subject to deduction of tax at source, you will
not be able to claim the costs of travel to and from the place
of work. This is the rule if the shift work amounts to an employment.
One thing that could reduce your tax bill, he pointed out, was
the possiblity of averaging your income over two tax years where
you have one very good year adjacent to one where you earn very
little, perhaps because you are researching a project or
travelling around the world.
He agreed that at the moment the cost of IT equipment can,
all 100% of it, be taken as a capital allowance in the year in
which you buy it. For more ordinary equipment, you offset
25 per cent of its remaining value each year. He pointed out
that it might be a matter of judgement whether a digital camera,
stuffed full of chips and screens, would count as IT equipment.
He warned people buying their own homes to be careful about
how they claim part of the costs of running their home as a
tax-lessening expense. It could open them up to the possibility
of being charged capital gains tax when they sell it. [Don't
(in general) claim on the interest. If you move your laptop around
from room to room you won't have an "office" on which
you'd have to pay capital gains tax when you sell the house.]
But he gave hope to many by mentioning a Civil Service
mandarin who wrote Mills & Boon romances during her holidays
- and charged as a taxable expense the costs of travel to the
exotic locations against which she set her tales.
Altogether the Branch was very grateful to Eric. We were
particularly moved that this one-time tax inspector should
start his presentation by asking us to remember Chile:
three days after this meeting was the anniversary of the
American-backed coup against Allende's democratic government
on 11 September 1973. "Although nothing can justify the
twin towers atrocity," he said, "our sympathy
for the people of the USA should not be at the expense of
remembering and recognising the reality of the US governemnt's
own atrocities in Chile and other places in the world."
- Eric will be giving an NUJ course entitled "Be successful. Manage your money" on 25 October.
For details see www.nujtraining.org.uk.