A client is a producer and has employment and freelance work in a typical year although this is heavily weighted towards PAYE roles.
She completed her own 2017/18 tax return with say £50k PAYE income across 4/5 short term roles and £5k freelance income (no expenses or trader allowance were claimed).
I am told that the aim is to develop and increase the freelance work and that this is a stand alone business dealing with smaller/shorter projects. The PAYE work relates to working as a producer on a 'run' or 'series' of shows/programs to generate income whilst getting known in the relevant circles for her freelance work.
The figures are all very low but i'm interested in other's take on this regarding allowable freelance expenses. Whilst the client did not claim any in the 2017/18 return she filed herself she has sent me a claim that exceeds the £4k income for 2018/19. I would consider the expenses claimed to be fully allowable if she had been in a clear freelance role for the entire year and this was generating her main income.
For 2018/19 she had employment roles for 11 months with just one single paying freelance job in March 2019. The expenses claimed have been incurred at various times throughout the year and relate to attending film festivals, trade related workshops (one in USA) etc so no costs of sales as such for this income. The client has confirmed that she has been developing the business throughout the year (more than 10 hours per week on average)and this includes a number of projects completed free of charge which I am told is standard in this industry. I have asked her to consider wholly and exclusively and she is happy that these costs qualify as expenses of her freelance trade and do not in any way relate to her employment income.
Is it reasonable to claim these expenses in full against the freelance income (I'm thinking that the employed role is closely related)? This would generate a small loss which could be offset against other income assuming this loss relief would not be restricted in any way (she has confirmed that she has put more than 10 hours per week into the freelance side on average).
The client has a social media prescence promoting her freelance work (be it paid or unpaid projects) but no website and no PI insurance.
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Did she claim the Trading Allowance on her 2017:18 return?
If not was this deliberate i.e. concern about possible connection to the employment or an oversight on her part?
Hi,
No claim made and I expect that she was not aware of it............she is now and I have given her this option for 2018/19.
It's really your job to come to a view on whether the expenses qualify as wholly and exclusively incurred for the purposes of the trade. I doubt whether the client is able to take an objective view of the matter. You and your client are the only ones who can take a reasoned decision on this as you are the only ones with access to the full facts.
Trips to film festivals and the like are likely to suggest to the Revenue mind some element of personal benefit akin to a holiday but if you feel you have a tenable case then by all means proceed to claim the loss. However make sure your client is aware of any possible challenges.
Hi, thanks for the feedback.
I think I'm happy that the expenses should be allowable if the client had spent the full year as a freelance producer and this was the main source of income.
It's more a question of whether or not the 'part-time' freelance role including free of charge projects and generating just one sales invoice in 2018/19 would be considered a commercial trade. A profit of just over £5k was included for 2017/18 so there is a history of profits.
The client is certainly of the opinion that significant time has been spent developing the freelance side of her income throughout the year which includes networking and free of charge work which is shown at these film festivals in order to generate interest and fee paying work (unrelated to the employment roles). It just so happens that only one fee paying project was completed in the year.
I was originally concerned that the PAYE roles would be of a very similar nature to the freelance work but this is not the case. The employment roles are as a producer /assistant producer working on a series or projects that will run for 3-6 months typically. The freelance work involves the client being the most senior producer on the team working on much shorter 'one off' projects e.g. short promotional films, music videos etc.
My position has changed in that I now think that the expenses claim is fully justifiable but very interested to here from anyone with experience of HMRC and those working behind camera in TV and Film in a similar position.
I have, off course, pointed out the risks of a HMRC challenge.