HMRC - Dealing with expenses with stock photography as a side business

[Nathaniel Noir]

Hello everyone,

 

I was curious about how people are dealing with their expense records for HMRC self-assessment when doing stock photography on the side (aside from being employed full-time)?

 

For example I buy a monthly or weekly travel card, however, frequently I use that card for going out to shoot stock as well and it's not always clear-cut assignments, I could be going somewhere socially and end up spending time shooting stock. Or another example is when going on holiday - I go for leisure but spend significant amounts of time taking stock pictures as well. 

 

What is the general consensus, I would greatly appreciate any advice / tips / suggestions on how to document and record such expenses.

 

Thank you!

[BobD]

Depends on your income from photography, you are allowed to earn up to £1000 pa without having to pay tax.

[Nathaniel Noir]

1 minute ago, BobD said:

Depends on your income from photography, you are allowed to earn up to £1000 pa without having to pay tax.

 

I mean when you earn taxable income, so over £1000 pa

[spacecadet]

8 minutes ago, BobD said:

Depends on your income from photography, you are allowed to earn up to £1000 pa without having to pay tax.

Strictly speaking, without having to account for tax.

You can reasonably apportion expenses that are shared between private and business use. But some expenses are wholly allowable, such as equipment and repairs.

In short, if you can carry on your business without incurring an expense, it may be allowable in whole or part. If you can't, it is, in whole. Likewise if you travel somwhere specifically for business.

Edited May 13, 2019 by spacecadet

[Bryan]

Need to be realistic, if your expenses exceed your photo income and you are using the deficit  to reduce your overall tax bill I suspect that HMRC will be interested, and that could cause a degree of misery. However, as Mark says, you can reasonably apportion expenditure, on your phone, travel (holiday 90% photography 10%) etc. Just don't get carried away!

Edited May 14, 2019 by Bryan

[andremichel]

Though my revenues from stock are not particularly high, I have been running it as a business. So I count all legitimate expenses including travel costs.

 

I don't have a travel card so not in same situation. Maybe you need to judge what % of the travel using that card is for stock and use that % of the cost as expense. 

[Starsphinx]

Regards travel the way I work it out - and I am driving not using transport - is I plot from home to location and back home and use that as my mileage.  I may not drive that exact route - I may go to other places on the way there or back but I only count the miles I would do if I travelled straight.

Regards a travel card - I would try looking at any journeys you would do purely for photography purposes - you may have done other things on them but those were secondary to photography and you would not have done them if not there for photography anyway - add up the non travel card costs of these journeys - and if they come to more than the cost of the travel card then you claim them.  You then show HMRC that those journeys were made for photography and would have made getting the card financially sensible - then for travel made using the card plot journeys from home to location without non-photography stuff and charge that as it would be without any secondary journeys

 

 

[Nathaniel Noir]

1 hour ago, andremichel said:

Though my revenues from stock are not particularly high, I have been running it as a business. So I count all legitimate expenses including travel costs.

 

I don't have a travel card so not in same situation. Maybe you need to judge what % of the travel using that card is for stock and use that % of the cost as expense. 

Thanks for your response.

 

This is exactly what I'm wondering, how do you calculate? Is it ok to have a rough estimate for a % or should i write down all the journeys that involved work?

[Nathaniel Noir]

6 minutes ago, Starsphinx said:

Regards travel the way I work it out - and I am driving not using transport - is I plot from home to location and back home and use that as my mileage.  I may not drive that exact route - I may go to other places on the way there or back but I only count the miles I would do if I travelled straight.

Regards a travel card - I would try looking at any journeys you would do purely for photography purposes - you may have done other things on them but those were secondary to photography and you would not have done them if not there for photography anyway - add up the non travel card costs of these journeys - and if they come to more than the cost of the travel card then you claim them.  You then show HMRC that those journeys were made for photography and would have made getting the card financially sensible - then for travel made using the card plot journeys from home to location without non-photography stuff and charge that as it would be without any secondary journeys

 

 

 

Thanks very much for your reply, that was very useful.

[Nathaniel Noir]

3 hours ago, Bryan said:

Need to be realistic, if your expenses exceed your photo income and you are using the deficit  to reduce your overall tax bill I suspect that HMRC will be interested, and that could cause a degree of misery. However, as Mark says, you can reasonably apportion expenditure, on your phone, travel (holiday 90% photography 10%) etc. Just don't get carried away!

 

Thanks, are you saying that it's ok to estimate a percentage of eg bills, holiday cost that apply to the business side and there is no specific specific HMRC rules or guidelines for this?

[spacecadet]

There are guidelines but of course it's not the Revenue's duty to minimise your tax bill. Just think about how much of your time was devoted to photography overall.

[Starsphinx]

There are some rules regards cost that HMRC can do automatically if you are on the Money In Money Out system which I would expect small businesses like stock to be on.  For example off the top of my head if you do not have a specific business vehicle but share your vehicle for business and personal you give them mileage and they allow 45p a mile for the first so many thousand miles then 25p a mile.  This is to cover wear and tear and stuff that naturally wears out as well as fuel.  They have formulae for allowances for heating electric council tax etc if you work at home based on space usage and days used - it can go quite fine to like quarter of a room for one day a week or something.  

Believe it or not, they themselves are a good starting point - they have several leaflets and videos online that can help you see how they are doing things so you can see how to claim what.

[Nathaniel Noir]

Fantastic, thanks!

 

Yes, I will give them a call, but wanted to do some research to know what to ask first.

[andremichel]

1 hour ago, Nathaniel Noir said:

Thanks for your response.

 

This is exactly what I'm wondering, how do you calculate? Is it ok to have a rough estimate for a % or should i write down all the journeys that involved work?

I would certainly keep a record of your journeys so you can explain how you came up with that value if you had to. 

[spacecadet]

Bear in mind that in the first couple of years of a new business showing a taxable profit is quite careless.

Edited May 14, 2019 by spacecadet

[Nigel Kirby]

When I first set up in business I went to see an accountant with my questions regarding expenses etc - this was a free one hour consultation with the accountant.

 

[Charles Stirling]

I have two businesses on the insistence of HMRC, photography plus a tool business. Some aspects of the two overlap and HMRC accepted that I put all the small overlapping expenses under one or the other but to do it consistently. Travel in UK is by car and not a huge expense so do a percent for personal and business which was approved by HMRC and stopped trying to keep mileage (1 mile here, 4 miles their, 60 miles somewhere, etc.) which has been accepted in an audit. Overseas generally goes as a photo expense as most of the time taking photographs.

[Yackers1]

50 minutes ago, spacecadet said:

Bear in mind that in the first couple of years of a new business showing a taxable profit is quite careless.

Being a qualified ACCA working in general practice I have to disagree. If you made a profit you made a profit - fact. Artificially creating a loss by "over cooking" the expenses is not right under any circumstances - new business venture or not. 

 

If there is a duality of purpose costs are disallowable. Costs have to be wholly, necessarily in in accordance for business. Using a proportion of your holiday costs will get challenged if your tax return is ever looked in to. 

 

For "use of home as office expenses" HMRC uses simplified expenses. YOu may be able to claim more but you have to justify these.

 

You need to find someone suitably trained/knows what they are doing to help you out (it doesn't have to be a qualified accountant). On the flip side there are many legitimate expenses and costs you may be able to claim that many people simply aren't aware of. 

[spacecadet]

3 hours ago, Yackers1 said:

Being a qualified ACCA working in general practice I have to disagree. If you made a profit you made a profit - fact. Artificially creating a loss by "over cooking" the expenses is not right under any circumstances - new business venture or not. 

 

If there is a duality of purpose costs are disallowable. Costs have to be wholly, necessarily in in accordance for business. Using a proportion of your holiday costs will get challenged if your tax return is ever looked in to. 

 

For "use of home as office expenses" HMRC uses simplified expenses. YOu may be able to claim more but you have to justify these.

 

You need to find someone suitably trained/knows what they are doing to help you out (it doesn't have to be a qualified accountant). On the flip side there are many legitimate expenses and costs you may be able to claim that many people simply aren't aware of. 

I said nothing about "artificially over-cooking" and stand by my comment.It should have been obvious to an accountant, of all people, that I was referring to pre-trading expenditure.

Wholly and necessarily, yes, but as you know not "exclusively" for the self-employed. If you can show a business purpose, you may well be entitled to the deduction.

I quote from the HMRC handbook

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim37600

"A non-trade or private purpose precludes deduction in full where there is no objective yardstick by which any trade element can be distinguished from the non-trade element. " ........ "you should not interpret S34(1)(a) ITTOIA 2005 and S54(1)(a) CTA 2009 as requiring that the whole of the expenditure be incurred wholly and exclusively for the purposes of the trade, profession or vocation. "

(my emphasis).

As to "challenge", on the one occasion on which I was investigated (a double-counting error in a pension contribution) my expenses for exactly the suggested reasons were not challenged.

 

Of course, you know better, and so you should at your hourly rate. But it's not the only advice that can be given.

Edited May 14, 2019 by spacecadet

[Yackers1]

At the end of the day it's "self-assessment" and what you are happy to report and submit to HMRC. There are different views, as there is with everything in life. As long as you are happy with your tax return...... If HMRC ever enquires in to one of your tax returns and challenges it then it is up to you to fight your corner and deal with it as necessary. 

 

[Bryan]

HMRC used to run free training sessions for those starting a new business, I don't know if they still do, but I found the course to be invaluable - could possibly do with a refresher! The law changes from time to time as each new Chancellor of the Exchequer has their own take on how things should be done.

 

From memory one of the most important aspects is the need to keep good records so that you can justify any claim with evidence. So keep all receipts and detail any travel etc. I believe that there is a maximum time that the tax man can drill  back into your affairs, is it 6 years? In which case you need to keep your records for that time. A friend once had his considerable car mileage questioned by the taxman, but he was able to detail the purpose of every trip made and his claim was accepted. Sadly the effort expended on doing this was not in itself deductable, so better to avoid scrutiny by ensuring that your claims are indeed accurate and realistic.

 

 

Edited May 15, 2019 by Bryan

[losdemas]

3 hours ago, Bryan said:

HMRC used to run free training sessions for those starting a new business, I don't know if they still do, but I found the course to be invaluable - could possibly do with a refresher! The law changes from time to time as each new Chancellor of the Exchequer has their own take on how things should be done.

 

From memory one of the most important aspects is the need to keep good records so that you can justify any claim with evidence. So keep all receipts and detail any travel etc. I believe that there is a maximum time that the tax man can drill  back into your affairs, is it 6 years? In which case you need to keep your records for that time. A friend once had his considerable car mileage questioned by the taxman, but he was able to detail the purpose of every trip made and his claim was accepted. Sadly the effort expended on doing this was not in itself deductable, so better to avoid scrutiny by ensuring that your claims are indeed accurate and realistic.

 

Yes, I remember attending one of those sessions. Seriously doubt if they are available anymore - funds won't permit. They do, however, schedule many interactive online sessions, have a useful Twitter feed (doubtless other social media, too), and you can sign up to receive emails with all this information. 

 

In my experience, HMRC do all they can to help you get it right. I messed up in a big way when I was in partnership a few years back, but they helped out tremendously. The most important thing is to be totally up front and honest with them. Sadly, though, very recent experience suggests that the knowledge and quality of first-line telephone staff can be poor at times. Online resources are pretty thorough though and, for the most part, in plain English! 

 

Yes, do keep good records. I have never been checked, but believe that I am well-prepared should it ever happen. 

 

The six-year requirement commences from the final submission/payment date for the tax year. So records for the current tax year have to be retained until 30th January 2026, and so on.