EMTACS
Entertainers and Musicians Taxation & Accountancy Services
69 Loughborough Road, West Bridgford, Nottingham, NG2 7LA
Phone 0115-981-5001 Fax 0115-981-5005

Recent News - EMTACS Spring 2006 Newsletter

The Spring 01 Newsletter is still around here somewhere even if it isn't up to date (click here to see it).
We also have the 2002 Newsletter here, if you feel like reminiscing (click here for it)

STANDING ORDERS

As ever, we'd encourage you to deal with paying our bills by means of standing orders. This is a help to all concerned. It smooths our cashflow and yours, softening the blow of what can be a chunky bill. No interest is charged or paid and we try to balance things so that you spend half the time in credit and half in debt. The necessary amount is typically going to be £30 or £35 a month, but it depends on where you are in the cycle of bills. If you are interested, then just complete the form below, rip this page off and send it back to us.

Click here to view printable PDF form

A 21st BIRTHDAY

It's nearly Easter and time for the usual present from the EMTACS Easter bunny. I guess there are some clients out there who've seen this sort of thing from us 20 or 30 times by now so the pattern must be easy to predict. There'll be a bit of news from the Budget, a couple of articles of interest, a sort of report on how things went with the last batch of Tax Returns and a general berating of people to try to get raw material in at the right time.

Actually things have changed greatly since I did the first of these things in March 1985. In the early 80's, I worked for some large firms who would put out Budget newsletters to their clients. These were stunning pieces of work. The Budget finished around 4.30pm and the in-house experts would start producing the more current bits of text that derived from what he'd said. The printers would start work around 6.30 in central London and the troops would be there collating and enveloping and then set off for the satellite offices. Special arrangements were made with the post office for them to accept the mail as being OK so long as we got it to the sorting office by 10.30pm and clients had it on their doormat in the morning post.

As an exercise in effective showing-off, it was masterly and all the big firms did it (and they still do). Nobody actually cared about the content, they were just impressed with the glossy front cover and the fact that all the tables in the booklet looked impressive. As a product, it was a 32 page glossy printed product and was streets ahead of anything I could manage even now. I can remember suggesting to my bosses at the time that we stick in a table that was completely irrelevant or stupid just to see if anyone actually paid attention to what our very expensive masters were writing.

So when I set up EMTACS, I had the idea that I could do the same thing and sat glued to the Budget, writing some in advance and hacking out a few quick tables once the Chancellor had sat down. It was a bit more worthwhile then - there were more frequent changes to the ordinary tax system in those days and for the first Budget I only had about 50 clients. I printed, collated and stapled and had the thing in the post by 7.30pm and on people's doormats in the morning.

Now despite the fact that I have a far more efficient system for writing and printing and half a dozen of us around to collate and send out the thing it limps out 10 days afterwards. The reason is that I've learned that (a) clients aren't actually interested in aspects of the tax system unless they are directly affected by them, (b) Budgets bring relatively little in the way of changes that require urgent action and (c) showing off like this just isn't clever.

So I try to focus things on what is important to people and chat a bit about aspects of tax and similar subjects that are interesting. If you want technical, I can still do it, just ask!

SHARPER DEADLINES

The Chancellor didn't mention this in the speech but at the same time as the Budget bits were published, the Treasury published the findings of the Carter report on Electronic filing. You won't care much about the technicalities of a lot of it but the headline news is that he has recommended that in order to encourage online filing, that those who file online should get an extended time for submission of the Return. Fair enough - I've been suggesting this to them for a while.

So his proposal is that from 2008 we would have a deadline of 30 September for those who wish to submit a paper return and to insist that only Inland Revenue paper returns will be acceptable. This last trick is to stop accountants from printing their own forms as we do. The idea is that if it then had to be transferred to Inland Revenue paper we wouldn't bother, we'd file the thing over the Internet.

But for those who do file online, there would be an extension to 30 November. So - no more 31 Jan deadlines and only 8 months in which to get things sorted out. The Carter report defends this change by pointing out that we have a very long deadline to submit figures right now since most countries make do with 6 months or less. A US Tax Return for the 2005 year has to be in by April 15 for instance.

Of course seen through the eyes of one individual client this isn't intrinsically a problem. We know that a lot of you only do the figures for us at the point when you have to. Nagging and bribes convince some of you but deep down, there are still a good third of you whose returns will always be done in the last month, whether that's September, November or January. The problem comes with us. We work flat out for the period November to January and we can't just transfer this back to Sept/Oct/Nov, because we're already fairly busy then. The only way that this schedule is remotely possible would be if clients suddenly all started sending their books in a couple of months after their year-end.

Even then we still have other issues to consider. The balance of 10 months of work with Feb and March to sort out the housekeeping works quite well, but if this ratio were to become 8 months on and 4 months of tidying up, then we have problems if we don't want to spend March doing jigsaws. As one of my more affluent friends suggested, his skiing is going to get really good.

Now this is a report - a sort of white paper, but the Revenue are treating it as if it was holy writ and have begun to discuss implementation. Naturally the accountancy profession is up in arms and is exerting what pressure it can to delay or alter the suggestions. My guess is that there will be some kind of compromise whereby online filing can still happen up as far as the existing 31 Jan deadline and paper returns have to be in by 30 November.

There are other aspects to the Carter report that we do welcome. Right now we have problems filing people's Returns electronically for all sorts of fiddly reasons and because the Revenue are slow in processing forms to give us authority to do so. But these are teething troubles - the Revenue's website stood up really well this year and we probably filed over 90% of our Returns electronically. This is a help to everybody as they get the figures right and the numbers are put in place instantly.

TAX SAVING GIZMOS

A lot goes on under the bonnet of the Budget these days. No-one is particularly interested in Gordon Brown talking on behalf of the Treasury about the increases in anti-avoidance rules and in truth they don't have much of an impact on your day to day action. But it's good to know that they are trying to curb the excesses of the seedier end of my industry. I do have some problems with this sort of stuff. A big firm of accountants in the US recently received a huge fine for their part in creating an illegal tax avoidance scheme and these artificial devices are questionable.

These days if you use design a tax-avoidance scheme you have to inform the Revenue of this and file it for approval, thereby giving the Revenue the ability to work out a way of either changing the rules or grudgingly accepting it and giving you a scheme number. Subsequent users of the scheme then only have to quote this number and the scheme will be accepted.

There's a very old tax case in which the judge said at the end that it isn't the responsibility of the taxpayer to enable the taxman to take the biggest shovel of money from his accumulated wealth. Those who design these schemes are clever people but morally suspect. What happens is that firms of accountants design a way of doing business or arranging ones assets that produces a much-reduced tax liability from what would have arisen if they'd left well alone. So by setting up a limited company in the Cayman Islands and paying a company service charge to an Isle of Man partnership you might halve your tax bills (doubling your accountancy bills by the way).

I'm not comfortable with that. So why am I happy with this spectacle of a Limited Company being set up that runs somebody's business instead of them being self-employed? Well I'm not totally happy but this is a reasonably sensible way to run the business which happens to have tax benefits instead of a daft way to run a business which is solely done to keep the tax bills down.

Even the limited company angle is looking to have a limited life-span. The £10,000 at 0% which companies used to have is gone and now the only advantages are paying tax at 19% instead of 22%, and the ability to pay dividends which don't suffer National Insurance. It's worth it but not as advantageous as before. In a parallel statement with the Budget, the Treasury have said they want to ensure that everyone pays a fair amount of taxes and NI on their income and I think that's a heavy hint that soon there will be NI charged in dividends, at which point all these limited companies should pack up and go home.

I have a bit of a moral conflict about this whole thing anyway. My daughter says that you only have morals when you can afford them (I think we were arguing about downloading music at the time) and maybe she's right.

BILLS

I always try to give some insight into the likely charges for clients in newsletters. Typical accounts are now running at around £235 + VAT and Tax Returns at £95 + VAT. That is the likely level of bill for an 'average' client and it can be more or less according to circumstances and the time taken in preparing a set of figures.

PENSIONS A-DAY

The government have been fiddling with pensions rules for so long now it's hard to recall when the rules were last stable. But the new rules that are coming in on 5 April 2006 (which they've called A-Day for some reason) should bring some degree of simplification. There are two areas where the rules are changing - how you get the money in and what happens when you want to get the money out at retirement.

The old rules of getting money into a pension fund were a complex set of tables, percentages and limits. These are now to be scrapped and replaced with a limitation that you cannot pay in more than your earnings or more than £215,000 in any one tax year. If you earn nothing or small amounts, you can still pay in £2,808. There is also a limit called a Lifetime Allowance of £1.5 million. If your pension fund exceeds this (a nice problem if you get it) you will in effect, no longer get relief on the amount you are putting in above this. These limits will be index-linked so you'll have to be planning a fairly comfortable retirement in order to have to worry about either of these.

Where you may have to think about this is if you have had a really good year in the past and are using this year as the basis for continuing to make fat contributions despite your income having dried up. In these circs, you are now going to be governed by the £2,808 limit and not the figure based on older, richer earnings.

Rules that allow you to move premiums from one year to another (called "carry-back" rules) are scrapped, although if for some reason you over-pay into your pension you can carry the leftovers into any of the next 6 years.

There are also revised rules about getting money out of your pension scheme. If your pension fund is pathetically small (less than £15,000) then you can take the funds out in a heap but beyond that you have a couple of options - you can buy an annuity with the dosh or you can trickle some money out of the fund for a while, buying into an annuity within a certain time-frame.

Retirement will not begin until age 50 (55 with effect from 2010). Some specific professions have official permission to retire earlier (Brass Instrumentalists and Professional Footballers etc). You can specify what happens to the pension fund in the event that you snuff it before your fund is used up - either to the beneficiaries of the will in a lump sum or as an income for the widow.

And what of the government pension? You hear a whole lot of discussion about the decline of the state pension and there's no doubt that if the government could get his own way, they would see the value of the pension whither on the vine. Right now the basic state pension is about £84/week for one person and £135/week for a couple. If you have both been contributing to the state pension scheme then you would each get £84/week. I can't see this level changing greatly, it will increase with inflation, but that's not as much as earnings are rising generally. So if inflation is 2.5% and earnings go up by 3.5% then over time the £84/week will decline in value by 1% per annum. Give that 40 years and the value of the pension halves. So don't place any exclusive reliance on the state to keep you in your old age, but do expect the state pension to remain a valuable thing for many decades to come.

THE ELECTRONIC CASHBOOK

This seems to have been a reasonable success so far. A number of people have used it and sometimes the end-product doesn't look as pretty or organised as you might hope, but it does the business and we are pretty good at re-organising Excel spreadsheets. Currently there are two routes to this. Give us a ring and we'll email it to you. Or, wait a couple of weeks and you should be able to download it as a pdf from the new and improved website.
electronically instead of having to be manually processed by some spotty kid in Dundee who knows nothing at all about tax.

There's a long-term favourite in our in-bound phonecalls in Feb and March where a client rings up to say that he's paid the amount we told him to and he signed his return before Christmas. We have to check with the Revenue to ensure that they have the Return, but just haven't entered the numbers yet and then sometimes have to submit forms to defer Revenue tax demands until they can be bothered to process things. All this is behind us now and I can only see the Revenue machine working more smoothly as time goes by.

CAPITAL ALLOWANCES

I do wish the Chancellor would make his mind up. Capital Allowances are a means of spreading the cost of a purchase across a number of years. So if you buy a car, you can claim a Capital Allowance (it's called a Writing Down Allowance) of 25% of what it was worth the previous year. Buy a car for £4,000 say and you can claim £1,000 that year and the value in the Revenue's eyes falls to £3,000. The next year you claim £750 and the car's then worth £2,250 and so on and so on.

But there are special rules for certain categories of Big Purchases. For a couple of years we had special rules that enabled you to claim 100% of the costs of computers but those have been phased out. What we still have is a slightly accelerated allowance that can be claimed in the first year you buy a piece of "plant and machinery". This had been 40% but was upped to 50% for 2004/05 to say sorry for doing away with the 100% computer allowance.

Then it was allowed to drift back to 40% for 2005/06 and now for 2006/07 it's gone back up to 50%. So the theory is now that you spend £1,000 on an instrument and you will be able to claim £500 as a deduction from your profits, thereby saving £110 off the tax bill if you pay Basic Rate tax. The following year you can claim for 25% of what is left (£125) and so on. So, you spend £1,000 and get a tax saving of £110 (year 1) and £27.50 (year 2) etc. Not really something that would make you rush to get your cheque-book out but it compensates you for the expense.

None of these percentages apply to cars though, where the 25% that can be claimed remains a sensible percentage and it usually provides a reasonable approximation of the decline in value of a car.

The other category that inspires puzzlement for clients are something called Short Life Assets. These are items of equipment whose value declines at a fairly predictable rate and which is worth nothing in a few short years. Computers come into this category as they are practically worthless (second-hand) by 3 or 4 years into their life. So we spread the cost over 3 or 4 years to make it fair.

2005 RETURNS - THE REPORT

One year we tried the experiment of letting clients send us their figures when they wanted to and if they missed the deadlines, then that was their fault. This led to us missing over 60 Returns, a whole lot of penalties and a very stressful January. Only an experiment and increasingly we have upped the nagging and the end result is that we hit a new low of 32 Returns missed this year. Since we have an increasing number of clients, this is a new high in percentage terms. We now have the same number of clients as when Angie departed and numbers continue to increase.

The ways in which we can smooth out the process of working on Tax Returns is if we can get our accounts workload under control. If your accounts run round to 31 March or 5 April every year then there isn't a great deal that can be done about this. But for someone whose accounts run round to
30 April 2005, then to delay doing the figures until mid-Jan 2007 is a bit unforgivable. Hence some of our clients in this category will have been chased up in recent days.

Yes I know you don't want to do the figures, but you know you're going to have to and that to do them sooner rather than later will (a) make it easier, (b) give you better control of future tax bills and (c) make you feel better because an unpleasant task will have been dealt with. But then this is like telling people they'll look and feel better if they eat a healthy diet and take regular exercise. And I've eaten my share of pizza (and someone else's share too!) so I know what I'm talking about.

As ever, there is the possibility that you might avoid sending us the stuff with one eye on the prospects of receiving a bill. This is easily solved by going over to paying us via standing order. Just send us the stuff and we are happy to see a standing order in place, even if this leaves you owing us a fair chunk - I'd rather be financially exploited and have the material early than leave it until later!

LOOKING THROUGH THE ENQUIRY WINDOW

We have a certain amount of division of labour here, but one task that remains with me is our enquiries with the Revenue. We had been getting falling numbers of enquiries, down from 26 in 1999/00 to 9 for 2002/03 but the 2003/04 Returns brought 12 enquiries and I've had quite a few face to face meetings with the Revenue this year, with another couple to come.

In part the decline in the volume of enquiries is a product of the Revenue being more practical about stuff and my impression is that they are a lot happier to nod stuff through that they might have queried previously because the extra tax they would gain from challenging stuff is not worth their time and effort. There continue to be certain areas that get serious complaint that you should be aware of.

Top of their interest areas is to be able to tie up the income side of the figures. In an ideal world, we need some kind of record that lists a particular gig, ties up to a payslip for that fee and then is paid into a bank account in an obvious way (either by BGC or a filled-in paying-in slip). Their first test is to examine your bank statements to see whether what you have declared as fee income matches up with what is recorded as income. So it's important to not only keep the bank statements but also to be able to identify the payings-in to that account, so that gifts and other non-taxable income can be easily picked up and allowed for.

Number two in their pecking order are motoring expenses. They want to know how you can justify your 90% figure of motoring as being business-related and to build up a profile of what journeys you are doing. You see journeys from your home to your 'place of business' are not deductible (I can't claim for going from my home to the EMTACS office for instance). But where is your 'place of business'. We label your own home as being where your work starts from, but sometimes this is a bit of a weak argument.

Someone who drives in to central London to play at the same West End Show or concert venue 6 times a week is really going between home and place of business. As such, that share of the motoring shouldn't count. At the other end of the scale is someone who goes from home to a different venue every night. For them the most frequent place of work is their own home because that's where they practise. How often in succession you can go to one specific place before it's your place of work is very grey. But there's no doubt that some of our claims in this area might well get opposed from time to time

Old favourites they like to trip out are clothing and appearance expenditure. During the last year the Revenue have altered their guidance notes about professional clothing. Try these examples from the very exciting Revenue publication BIM50160:

A self-employed television interviewer may deduct the costs of a lounge suit acquired solely for use before the cameras - it is the interviewer's 'costume'. By contrast, a self- employed architect who buys a suit in order to create a good impression while being interviewed on television may not have a deduction for the cost. The suit is not a self- employed performer's 'costume'. It is 'everyday' clothing worn in the course of the architect's profession. A film actress may acquire an evening gown solely for the purpose of attending the premiere performance of her latest film. The cost of the gown is allowable. The later private use of a gown, which as a question of fact was bought solely for use at a premiere or other such occasion, does not result in disallowance of the expenditure. But if the actress bought the gown with a view to use both at the premiere and on other private occasions, no deduction is due.

This slightly undermines the Revenue position that no clothing can be claimed, but it also undermines any claims for black clothing for pit work. Ordinary clothes are not deductible and in theory if you can travel to and from somewhere wearing the stuff you are going to wear in a pit, this invalidates any real claim. But having said that black stuff shouldn't be claimed, we have had occasional success even when challenged on it, so we continue to claim and sometimes to restrict what's been claimed to reflect the fact that we appreciate the duality of purpose.

LONDON VISITS

Trips to London have been a bit ad hoc, despite my attempts to set up a predictable calendar of visits to town. If there's only one person to see, then obviously hiring an office is a bit daft.
But I know it does help so planned visits for the next few months are:

Monday 24th April
Monday 26th June
Monday 22nd May
Monday 31st July

THE WEBSITE

…is my next task! In theory as a new tax-year begins, we are inundated with work, but this isn't true. Accounts do start to come in, but sadly it's not a flood so I will be using the next couple of weeks to get this and other 'public face' sorts of aspects of EMTACS up to speed. So check in on www.emtacs.com to see the changes.

WHY 5 APRIL?

I have a good working relationship with an accountant in Los Angeles. We chat through stuff regularly and I ask him dumb questions about the US tax system and he asks me equally obvious things about things over here. One puzzle he put to me that often puzzles British and others alike is our strange tax year-end of 5 April. No-one else has it and even those former British Empire countries we exported it to have by and large ditched it.

The answer is that it's to do with collecting taxes on rental income from land. These rents are due on Lady Day, the quarter day which falls on 25 March. So tax returns were due on 25th March 1751 as normal. But that Christmas Britain went over to the Gregorian calendar and 11 days ceased to exist. Of course since they want to still collect rents and taxes for a whole 365 days, the year end was moved on to 5 April 1752 and there it has stuck Just thought you might like to know…!

MY FAVOURITE CYCLIST

…as mentioned in the last newsletter is a chap called Alastair Humphries who completed his epic trip shortly before Christmas. For more see his www.roundtheworldbybike.com which describes his attempts fairly explicitly. His total amounts raised must be well over £30,000 and he hopes to raise £1 for Hope and Homes for Children for each of the 46,000 miles that he covered.