What Expenses Against Undeclared Music Royalties?

Post-Cessation Music Royalties, Collecting Agent's Costs, Accountancy and Overseas Tax Withheld

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I have a long-standing very elderly retired musician client who has been in receipt of music royalties since retirement donkey's years ago. I would reckon that royalty receipts in the past have totalled between £1,000 to £3,000 per annum, and are paid by the BBC, ITV and the Musicians' Union. Since the agents' statements simply show the net amount paid to my client, I have fairly quickly added the royalty figures up each year and included the total amount paid in box 17 (Other taxable income) on page TR 3 of the tax return.

I have never deducted any accountancy from the gross figure for two reasons: 1) Difficulty in understanding the income tax rules on royalties, and 2) the small amount of time it takes to add up the royalty figures.

However, client has just realised that he has been receiving quite large royalty amounts from royalty collecting agent "D" into his bank account, which he had overlooked. The reason for this is that he is quite old and the agent paying the royalties does not send any paperwork to the client, expecting him instead to access his account over the Internet, which he is unable to do due to old age.

The royalty statements received from agent D are quite complex. They reveal a myriad (in the hundreds) of small receipts from overseas sales of music.

Each NET receipt is accompanied by a marginal note indicating a percentage % figure for overseas tax deducted at different income tax rates from different countries at 0%, 5%, 7.5%, 8%, 10%, 13.2%, 15%, 20% and even 30% (greedy US tax rate).

There is also a marginal note indicating the collecting agent's cut of 7%.

I will therefore have to prepare a very detailed Excel spreadsheet showing, for each country, gross royalties received, foreign tax deducted, collecting agent's commission and net amount received. I will then have to check the double tax agreements for each country to determine the amount of overseas tax deducted to claim.

I can tell this is going to take an age in my time.

I have always found the tax rules on royalty income badly explained, but is seems that my client's income is classed as post-cessation receipts and as such will be entered on page TR 3, box 17.

From the grossed-up figure I will deduct agent's commission and accountancy. I assume that the accountancy and agent's costs will be included in box 18 on page TR 3, box 18.

I will then give the overseas tax as a credit once I have found where to claim for it.

But the question I have is, am I correct in claiming accountancy and agent's collection costs as an income tax-allowable cost against this income.


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By Trannysister
06th Sep 2019 10:33

Agents fees are deductible.
I'd charge accy as well on the basis that HMRC aren't going to investigate this unexpected bonus declaration.

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