Rachel Hair’s latest money queries

Here is Rachel’s new money diary and like last time we’re going to ask you to make any comments and add any extra relevant questions before we get our panel of experts to deal with Rachel’s queries. As usual you can leave a comment at the bottom of this page or drop us an email at info@moneysucks.net

“I’m sitting in the car for queued to get onto the Cal Mac ferry to get back to the mainland. I was playing last night at the stunning Mount Stuart on the Isle of Bute for (and I kid you not) Russian billionaires who were cruising around the Scottish coast on what until 2 years ago was the world’s most expensive super yacht. But of course they had to take a 24 hour break from the holiday to fly off in their private jet down to London to see the Champions League final. How the other half live eh?

I had a rehearsal with Jenn Butterworth on Friday (1/3 of my trio) and during our coffee break we started to chat about car use, and the cost of petrol. We both drive near identical cars and Jenn was saying she was considering changing to a diesel car as she reckons our cars aren’t the most economical with regards to miles to the gallon. My plan with mine has always to run it to the ground….I do such an insane amount of miles that within a year my car depreciates by a huge amount and I reckon that I wouldn’t be able to easily sell it and upgrade without saving a heck of a lot of money first!

Our discussion went on to talk about how we deal with travel expenses as we were both going to be doing teaching the next day for the Edinburgh feis. They pay us a fee and expenses based on an amount per mile. This is the same for some other organisations I do performances for. Some of my own corporate/wedding work that I contract to I also add on travel expenses to my fee. So my questions this week are:

• What is the best way in my accounts to write this up/claim for it?

• Let’s say I am paid £200 for a performance and they also give me travel expenses of £30 (worked out from their rate of 100miles at 30p per mile). Should I

a) Write in my account that the fee was £230 (it was on the same cheque) and then claim mileage at the HMRC amount of 40p per mile?
b) Write it in my account fee was £200 and then disregard the £30 travel added completely and then not claim for mileage?

• In the past I have always done option a) but have always wondered if it was the best? Certainly with my own work I have added on travel expenses, which are detailed in my contract to clients, and then put the fee which included the expenses in my accounts and then claimed mileage at HMRC rate.

• On this trip that I’m on just now I’m planning on putting my fee (which I worked out with ferry costs in mind) in my accounts, and then claiming HMRC mileage and the ferry costs. I’m assuming that’s the way to do it!

• I’ve had situations with gigs abroad where we’ve had to buy our own flights but then the promoter added the cost of the flights that we paid to our fees so that we didn’t lose out. Again, is it best to

a) Put our fee as the actual amount, including flight costs, that we were paid in the end and then to claim flight costs from HMRC?
b) Disregard the fact that we were paid a bit extra to cover flights and just put in the gig fee alone into our accounts? I’m always wary about this as there could be a discrepancy in payments from promoters verses what was in our accounts especially if we were paid by BACS.

• And one other thing…. I had a moan a while ago because it seems that the price of petrol has increased by such a lot in the past few years but that HMRC had not increased their mileage rate from 40p. Jenn told me she had heard they’d increased it to 45p now….is that true???”

This month we have asked Colin Abercrombie, of Abercrombie Gemmell Chartered Accountants (www.agca.co.uk) to answer Rachels queries but thanks are also due to Accountants Andy Logan at Robb Ferguson and Frank Reid, of Frank Reid Accountants, for their input below as well.

Colin comments:

“As Andy states, Rachel should always include the money received in respect of her fee plus expenses in her accounts; i.e. the full £230. However, there are two alternatives to consider when making a deduction for her travel expenses:

Method 1 : Rachel could claim 45p (40p pre-6 April 2011) per mile for each business mile travelled for the first 10,000 miles followed by 25p per mile thereafter.

Method 2 : Rachel could bring her car into her business as a capital asset. This would allow capital allowances to be claimed on the value of the car together with the yearly running costs of the car; e.g. road tax, MOT, repairs, insurance and of course the cost of petrol. However, care needs to be taken if Rachel has private use of the vehicle as only the business use element of the car would be an allowable deduction for tax purposes. Therefore, if Rachel used the car for business purposes 75% of the time, then she would only be able to claim 75% of the running costs of the car as a tax deduction.

Both of the above methods are worthwhile and Rachel should take care to ensure that she opts for the method that suits her best. It should be noted that Rachel cannot opt for different methods each year – she needs to choose one method to use consistently.

As mentioned above, Rachel can claim 45p per mile for each business miles travelled from 6 April 2011 onwards.

As always, Rachel should maintain full business records to support any claim she makes in her accounts.”

Ill, but still in need of an income?

If money is tight these days when you are working imagine how you would cope if you are off sick for a prolonged period of time?

If you are self-employed your income will probably stop as soon as you stop working when you are ill or following an accident. Even if you are employed your employer may only continue to pay for the first few weeks of absence.

Although there are still some State benefits available they are becoming more difficult to claim and will not replace all of your income. This is where Income Protection, or Permanent Health Insurance as it used to be called, can help. This type of insurance is designed to replace your salary until you are able to go back to work.

The first thing to decide is how long you can wait before any benefit starts. If, for example, you get six months full pay and six months half pay from your employer you could afford to wait for a year before most of your benefit starts. If, on the other hand, you were not paid at all if you were off sick you would need benefit to start straight away – although most policies have a waiting, or ‘deferred’, period of at least four weeks.

The longer you wait before benefits start, the less the policy will cost you. Other factors which influence the amount you pay include your age and sex – women are likely to pay substantially higher premiums than men since most companies have seen more claims from women (although this may change soon in line with a European Court ruling on equalisation).

Your occupation will obviously be a factor as well. A concert pianist is likely to be harder to insure than an accountant!

Insurance companies will not allow you to insure all of your income. A sore back is difficult to diagnose and is unlikely to get better if someone is paying you all of your salary to sit at home. Somewhere between 50% and 65% of income is normal, although different companies have different definitions of income. Some will allow you to count overtime or bonuses, others won’t.

As with all insurance you should check the small print before you sign anything. Companies define disability in different ways. Some will pay out if you are unable to do your own job – other will only pay if you are unable to do ANY job. Obviously an ‘own’ occupation definition is better, although for some occupations such as a surgeon or a pianist difficult to come by.

Insurance companies will want to see your full health history. If you think something is relevant then you should tell them. It’s pointless paying premiums for years only to discover that your claim is refused because you forgot to tell them something when you completed the application form.

Rachel’s Money Questions Answered – In Style!

Well we promised you some answers to Rachel’s money chasing woes and we’ve certainly got lots of them here. Martin Stepek, Chief Executive of the Scottish Family Business Association, kicks off with some great down-to-earth advice for anyone in business – not just musicians.

And if you are still struggling after trying all of Martin’s varied and practical tips then Paula Skinner, Partner at Law Firm Harper MacLeod, explains how you can seek redress through the courts.

All in all some fantastic advice that should help anyone struggling to get paid – without upsetting those you are chasing for payment too much (well as long as you are successful using Martin’s ideas and don’t end up in Court!).

It’s a longer piece than we would normally have on the site but it’s really packed full of useful information so please take the time to read all the way through!

Enjoy, and let us know if this was useful for you.

Martin starts us off:

“Chasing unpaid invoices is one of life’s most annoying and unpleasant tasks for most of us. So my first piece of advice is learn not to get frustrated by it. As my mother once told me when I complained about the pouring rain when I was going out to play football, “If you live in Scotland you need to learn to love the rain.” Accept it as part of your life.

That leads to the next thing. If it is part of your life it deserves a place and a space. Good personal and time management are some of life’s hidden joys. They save you getting surprised or upset and it feels like they buy you time and energy. So diarise – as if it was a concert – the dates you will check on your invoices to see if they have been paid or not, and stick to it as if it was a real concert date. If money should have been in your bank account on Monday 15th then the date to query why it is not in your bank account is Tuesday 16th.

As one of the people who wrote comments on the Moneysucks? site suggested, if you can get someone else to do it for you that’s great. But make sure it’s someone who cares about you – or your money! – as much as you do, otherwise you will probably be more effective doing it yourself. I am a great believer in delegation but the key to delegation is to give the task to the right person in the first place! Often it is a lot easier for someone else to chase as they are not directly involved in the relationship between musician and venue / festival / agent.

If the problem largely occurs with agents, and the agent doesn’t change his or her ways, pass them by phone or email – or if necessary by letter. Explain the situation to the organisation itself – if you can’t find the name of the actual person write to or ask for the Head of Finance – and say that in your eyes as a performer the agent’s failure to pay on time reflects badly on the people who employ them; in other words that their reputation is being harmed by their agent. Writing a letter is a pain in the backside in these days of emails, texts and instant messaging, but they are all the more real and powerful because of this. And a letter of criticism is always dealt with whereas emails can be ignored. But a phone call is best of all if you can get through.

If they don’t get round to paying you on time, ask yourself how much this gig or venue or organisation matters in the big scheme of your life. If the answer is “not that much” write to them and tell them that you are no longer prepared to work with them because they are being dishonest in their dealings with artists. Consider adding that you will share your story with fellow artists on Facebook and other groups. Don’t say or write this is an angry or negative tone, just say it like it is, calmly and matter-of-fact. You might think though that this could end up being harmful to your future prospects so think carefully about it. I have another, less personal suggestion on this theme below.

For unpaid invoices on which you didn’t have your payment terms, phone or write to them explaining your omission, tell them what your terms actually are, and ask that they now pay by return the overdue amounts.

In reality there is no such thing as a standard period for payment. 30 days is common, so are 28, 21, 14 and 7 days. This is actually a matter of negotiation between two parties. If you have put 28 or 30 days as standard then the other party will just accept this if they are happy with it. If you say payment must be on the day of the concert you don’t know if they will accept that. Given that many people you do work for pay you on the day, try to make that your standard, and state that this is the norm for the work you do. Then deal with any response. I’d go to 7 calendar (not working) days as my first response if the organisation says that payment on the date of the concert is not acceptable to them. If they say that’s too short a time, try to stick with it, saying that you are a poor wee struggling artist and they are a major organisation, that you need the money in your bank more than they need it in yours. Keep the conversation light and humorous if you can. Remember that unless it is the Carnegie Hall in New York or the Maracana Stadium in Brazil you can always say “these are my terms and if you don’t like it you don’t have to have me appear.” You have to be the judge of what is acceptable; just remember, the more they push you the more they will continue to push you. The more you stand your ground and push them the more likely you’ll get what you want next time. By the way my father once negotiated with Phillips the Dutch electronics company to buy £1million worth of televisions from them in 1970 when colour tv was just becoming affordable, and he asked for and got three years to pay! Remember this when you are famous and planning a world tour of football stadiums – ask for 50% up front a year in advance!

But be generous-minded if the people who owe you are struggling. Even massive companies fail for want of cash so don’t base payment or failure to pay on the size or reputation of the organisation. If someone hasn’t paid you promptly, you are entitled to ask them if they have a cash issue that is causing them a problem. In 99% of cases they won’t have a problem, and might be embarrassed enough by your question to cough up quickly! But they just might have an issue so do ask.

At my family business Stepek, when the miners’ strike started in 1984, our directors met to discuss the ramification for those on strike, hundreds if not thousands of whom were very long-standing customers of our business. They bought televisions or washing machines etc from us, paying week by week on credit, or else rented their tv from us. If we received a letter or phone call explaining that the customer or their spouse was on strike and money was tight, we had a policy of simply saying “pay us what you can, don’t worry about it, we won’t take any action against you, and we’ll sort it out together in the long run.” The strike lasted a lot longer that any of us could imagine but we could withstand not having the money coming in more than the miners’ families; and they almost all paid everything eventually. We charged no extra interest. So be decent to people if they are decent to you.

That said, you must deal with deliberate withholding of your money effectively. We used to have three letters, sent a week apart. Imaginatively we called these A, B, and C, letters. The first simply stated that an amount was now overdue; to ignore the letter if payment had been made in the interim period, otherwise we would be pleased if the customer would pay within the next few days. The second letter reminded the customer that they were overdue on their payment, that continued non-payment wasn’t good for either of us, and that we needed to see payment made promptly. The third letter said the amount was still unpaid and that the next letter would come from a lawyer and court proceedings would be started if payment wasn’t made on receipt of the letter.

You could do worse than draft an email or phone call script based on these steps, maybe substituting the legal threat with a publicity threat. (Frankly if people don’t pay you, do you want to work for them again?) Perhaps the musicians’ union would set up a part of their website, detailing who doesn’t pay and who consistently pays late; a threat to add more details to that kind of list would soon make most organisations pay. Of course you’d have to show proof that this is the case but worth exploring.

Sometimes you won’t get paid. Life is like that. I’m still due quite an amount of money from a friend from university days. I lent him the money in 1979. Somehow I think I won’t get it now. Don’t dwell on these things. But do make sure other musicians know so they don’t have to be ripped off like you were.

Hope this helps a bit!”

If none of the above helps then time to speak to Paula:

“Before starting more formal debt recovery proceedings, it is worth assessing the situation and whether recovery is likely. For example where a customer is in financial difficulty, it may be advisable to simply write off the debt rather than incur costs of court action.

When services have been provided you should ensure customers are invoiced promptly. It is advisable to provide a clear period for payment of all invoices in your terms. You may also want to provide for interest on late payments. As there will be a contract between you and the customer, you can state any period for payment. You may word it as “Payment should be made within 28 days from the date of invoice”.

If there is no date for payment provided, you should allow the customer a reasonable period for payment – 28 days is fair in most circumstances. Once this period is up, you could try calling the customer to prompt payment.

If payment is still not forthcoming, you should send a letter advising the payment is overdue. This should offer the customer between 7 and 14 days to make payment, failing which legal proceedings may be commenced. It is worthwhile highlighting if legal proceedings are necessary, interest and expenses will be sought in addition to the outstanding sum.

If payment remains outstanding, you may then wish to commence legal proceedings. You are not required to and instead may wish try to reach a payment arrangement with the customer. If you decide to proceed, the amount of the outstanding sum will determine the type of court action. For sums below £5000 in England and £3000 in Scotland recovery can be done as a small claims action and you can deal with the proceedings yourself, to save costs. Small claims information can be found at http://www.scotcourts.gov.uk/sheriff/small_claims/index.asp for Scottish claims and https://www.moneyclaim.gov.uk/web/mcol/welcome for other parts of the UK.

Court action should be seen as a last resort as the costs involved in court action can be high and will vary depending on the type of action, the complexity of the case and whether the customer disputes the case. Before raising an action, you should also keep in mind that court proceedings can often take longer than expected to conclude.

If you have any questions or concerns regarding an outstanding sum you should speak to a solicitor for advice.”

Rachel’s Money Chasing Diary.

 

A quiet month gave Rachel the opportunity to try to collect some money owed.  We’ll let her take up the story from here:

“Last month seemed for me to be quite a quiet month for professional gigs and I mainly spent my time playing corporate events and teaching my private students.

Unfortunately I had to spend a good amount of time emailing and calling people to chase up unpaid invoices I’d sent. Some of these were unpaid for almost 2 months after I’d done the work. Generally with professional concerts we get paid on the night. With corporate and wedding work that I do myself I also get paid on the day.

With some events though (like ones done through agents) I have to invoice and then wait to get paid. Some of these organisations have a standard “pay day” at the start/end of the month so I always know when to expect payment.

For 3 gigs I did in January I had to do a lot of chasing of my invoices. I’ve now noticed that I didn’t put any terms on my invoices. I remember I used to have them but found they were ignored by agents who had a standard pay day, so I took them off. When I did have them I had a standard 28 days. I really think I should have put them on the invoices that in retrospect I had to chase up.

What is a sensible amount of ‘time to pay’ to put on an invoice? Obviously I’d like to be paid as soon as possible, but I don’t want to come across too pushy. Would 7 days be a bit too much? 14 days perhaps be a sensible amount? And are those termed as actual days or working days?

What happens though if I am still not paid after the term has lapsed? There are quite a lot of times throughout the year when I seem to spend my time chasing invoices and am constantly told we’re trying to process it, or someone else is dealing with it. How strict should I be about the terms? I feel it’s quite hard to be firm about things as I don’t want to annoy the folk I’m asking to be paid as they are usually people who are likely to employ me again for work in the future. And what should I do if the terms lapse and I still don’t get anything?

This really caused me a lot of stress last month as it was work that I’ve previously been paid for within a few days. One of the cases was due to a change of management and unexpected changes to payment processes…they were incredibly apologetic which was good. However with the other 2 cases it proved for a rather stressful month of money management!”

Moneysucks would like to hear from you if you have had similar issues to Rachel recently. How do you deal with late payers? Should you be gentle and polite or just send threatening letters and kep the lawyers on a none-too-long leash? We’ll then pass all of your comments to Business guru Martin Stepek, Chief Executive of the Scottish Family Business Association, for his views on dealing with recalcitrant debtors. Wwe’ll also give yousome legal tips on when you should think about legal action if the debt remains unpaid, and how to go about taking that action.

First time buyer? Take your time and do your sums.

A fascinating report just released by the home equity company SHIP suggests that in the UK the average house deposit for 1^st time buyers is now 50% higher than the average cost of a first time buyer’s house in 1983. At the beginning of the eighties a first time buyer could expect to pay £20,810 for the average house. That figure is now £136,842 – an increase of 558%, and a first time buyer today would need, on average, a deposit of £31,474 to secure a loan to buy it.

To be fair it might be possible to find a 90% loan these days but you might end up paying an interest rate of close to 7% rather than the 3% or 4% that you would be offered if you had a bigger deposit.

On top of these pretty horrific numbers the report goes on to suggest that the average age of first time buyers is now 37 if they are buying independently and 29 if getting help from parents or other family members.

So it looks as though there are plenty of hurdles to jump through when trying to get your foot on the first rung of the ladder, if that’s not too much of a mixed metaphor.

So if you are looking to buy your first house what can you do to make the process easier?

Moneysucks offers you some tips:

 Make sure you do your sums before starting to look at properties.

Calculate all of the costs involved in the purchase remembering to add in Mortgage Arrangement Fees and legal costs as well as the deposit. And remember that it might seem like a good idea to add any fees to the loan to save you money up front but if you do that you’ll end up paying interest on it for a couple of decades!

And when you’re doing your sums make sure you take into account increased costs when you own rather than rent. Your monthly expenses will increase and it’s easy to get lulled into a false sense of security if you think only of the cost of the loan.

Check out your credit rating

Although most lenders will base the money they lend you on your income, more and more are also taking account of any other loans or debts that are outstanding so clear as many as you can before looking for a mortgage. Also your credit history is important so make sure that you are up to date on all of your other commitments.

Share the cost?

More first time buyers are buying jointly – either getting into bed (metaphorically at least) with a partner, family member or friend to help spread the cost. Even the Government might help with some of the ‘shared equity’ schemes that are now available. If you do go down this route make sure you take some robust legal advice before you put pen to paper. There’s no point saving a couple of quid now only to end up losing it all in a lenghtly and frustrating legal battle if it all goes wrong and you fall out a few years down the line.

Take Advice

It’s a jungle out there are there are hundreds and hundreds of different mortgage options to choose from. It’s a good idea to do a bit of research for yourself online but there are lots of good quality independent mortgage brokers out there who will guide you through the process and make it as painless as possible. They will need to be paid so check whether their fees come from the mortgage company or from you.

It’s not about making money

The recent property boom has led many to believe that owning property is a licence to print money. It’s not. A house is a home and a place to live not an investment! Treat it as such. If you want to make money out of property buy another one and rent it out, but that is risky and you should take a long term view. If your only property is the one you live in treat it as a home rather than a money machine!

Me and My money – Alan Reid

 Alan Reid, original member of Scotland’s great Battlefield Band and now in his fifth decade as  a working and travelling musician, answers Moneysucks? questions and hopes his answers will help a new generation of musicians understand how to cope with life on the road.

Q. What’s been your most expensive buy?

A. Apart from a house (mortgage shared with my wife) I would say buying a car.

Q. Did you learn about money as a youngster?

A. Not especially but I seem to have inherited prudence from my family

Q. Do you invest in the stock market?

A. Yes, though that’s because returns from other sources are usually paltry

Q. Do you take risks with your money?

A. Some, but my aims are long term and I tend to put money away and then not worry about it.

Q. Would you borrow to set up in business?

A. Not at the moment but I wouldn’t rule it out if I was confident about returns.

Q. Are you comfortable banking and buying on-line?

A. Yes, especially since if I’m travelling on line banking helps me keep tabs on my finances

Q. Have you made any real mistakes?

A. Oh yes but nothing that cleaned me out.

Q. Are you a spender or a saver?

A. Saver

Q. Do you enjoy dealing with your money?

A. On the whole yes. I like to feel I’m in control of it.

Q. What are your priorities over the next ten years?

A. To keep working and be reasonably successful

Q. Best buy/worst buy?

A. Best. My Scottish Widows pension and life insurance policies and the subsequent nest egg from demutualisation. Worst. Taking £2000 of Halifax shares rather than the cash.

Q. Does having money make you happy?

A. As long as I have enough to live on. My needs are modest. However my income is precarious because of my profession.

Q. Cash, cheque or credit card?

A. Mostly cash for small purchases. Credit card for convenience and security.

Q. Cut spending or increase taxes?

A. A mix. Cut some spending and increase direct taxes.

 

 

 

Consumer

Q. Do you put up with shoddy service or complain?

A. More than I should. I’m more likely to not be a return customer. I have though written a few letters of complaint.

Q. Are you a savvy consumer?

A. I research the internet to compare prices

Q. Would you take back faulty goods or put up with them to avoid a fight in the shop?

 A. I’d take them back and behave as if I expect the shop to be reasonable

Q. Do you need a receipt to return faulty goods?

A. You need some form of proof of purchase unless a kind salesperson remembers you.

 

 

 

Music

Q. Do you work effectively at home or are you a time-waster?

A. I find it difficult to manage time and sometimes to prioritise so it varies.

Q. Was money education built-in to your university course?

A. No

Q. How do you budget your way through the feast and famine of a life in music?

A. Well I never have a lot of money so I look ahead and cut spending when necessary. But I’m very fortunate that I have a wife with a good job.

Q. Do you have an easy relationship with the taxman?

A. So far.

Q. Are you planning for the day you stop making music or do you spend what you earn in the here and now?

A. I have a private pension and several of those aforementioned long term investments but I’m not setting a date for stopping music. And I like to have some money for emergencies.

Q. Do you have to balance performing and teaching or has teaching taken a back seat now?

A. I’ve never been able to get any teaching,

Q. What’s the difference between playing for enjoyment and playing for work?

A. Playing for work means that because you need to work to earn money sometimes you accept work you may not look forward to. Playing for fun may mean you can turn down work you don’t fancy

Q. Do you think students studying to be musicians treat it differently to those who learn for fun and get into music ‘by accident’?

A. Music students by definition have decided on a career path so they will have more of a structured approach than the  ‘accidental pros’. They will also have the pros and cons of having a peer group around them. But I’m not so sure that many ( in folk music) take the accidental path any more.

Q. Do you play for free? And if so what are the rules?

A. I do very occasionally for charity or benefit. But I have no set rules, just take each case as it comes

Rachel’s Money Diary Part 2 – More Tax Stuff!

This is the second ’episode’ of Rachel’s Diary, and comes after a lot of questioning between musicians over coffee and beers since her first diary appeared a few weeks ago. There seems to be a lot of confusion over how to deal with overseas income that is taxed in the country in which it is received, and a concern that the same fees are then taxed again in the UK. Hopefully we go some way to answering these questions here but if you have any other questions about any of this, or any issues that you would like to see covered in Moneysucks? For Musicians then please drop us a line here

We know that these answers won’t cover every single situation but we have answered them for Rachel in a way that we hope will benefit all musicians who have an uncomfortable relationship with HMRC (otherwise known as The Revenue!). Find out more about Rachel and her music at www.rachelhair.com or http://tinyurl.com/6fzw5uu

 

Rachel’s Questions

Well I guess this diary is a result of some questions and conversations that have arisen from the writing of my first diary entry a couple of weeks ago. Last time I talked about the joys of working abroad and getting paid in a different currency and how to deal with this so that it looks in order in my accounts for the tax man. My colleagues and I have been talking about what happens if you pay tax to another country when working abroad.

My trio and I are in the middle of finalising the details for a tour that we’re doing in Norway this September. The tour is a mixture of public and school concerts and is being funded and organised by a Norwegian Government funded organisation over there. As a result of this our promoter has being talking to us a lot about the tax implications of the tour. 

With the majority of the gigs we’ve done in Europe we’ve been paid cash in hand and I’ve put them through my books as usual, paying tax as normal to the UK Government but with the Norwegian tour we’ve been told we will have to pay tax to the Norwegian Government and therefore as a result our promoter is taking this into account and raising our fee so we still come home with a payment. What therefore do we tell the UK taxman about this tour when we write it in our books?

If we include it in our accounts will we be taxed again? If so, can we claim back the tax we paid to the Norwegian authorities as we would then have been taxed twice? 

Norway in particular isn’t an EU member so is this therefore a situation unique to this country? Does every country have different rules? I have played in countries outside of the EU but the tax thing has never been mentioned so I’ve just put through the gig fees in my books as normal and paid UK tax on them.

I believe that a couple of times when playing in EU countries I have filled in/signed forms (I believe in France and Germany) to do with the tax. I don’t have them to hand immediately (they’re somewhere in my big box of old accounts under my bed!) but could these forms have been somewhere along the lines of tax exclusion forms saying I don’t have to pay tax in that country but will do so in my own country?

 So I guess some questions from this are as follows (apart from the ones I have already asked!):

If we are taxed in a country abroad do we put it through our own books?

If not, how do we inform our tax man that we have worked but already paid tax?

Can we claim the tax back from said country easily? If so, do we lose any money through admin fees etc. by doing this?

Are there different rules/regulations/procedures for a) different countries in the EU or do they all work the same b) different countries throughout the world?

 

 

 

Moneysucks Answers

 

Gigging overseas involves many issues, only some of which will involve taxation, and many of which will appear in future issues of Rachel’s diary I am sure!!  As last time we asked Graham Faulkner of Chartered Accountants Abercrombie Gemmell for his take on Rachel’s questions.  His opening shot was to tell us that in general terms “a UK resident and domiciled individual is potentially liable to pay tax on worldwide income.  This includes profits from trading in other jurisdictions. If these profits have suffered overseas tax, relief will normally be available for an individual under what is known as a Double Taxation Treaty.”

So there you go! The short answer, without getting caught up in what is ‘a UK resident and domiciled individual’, is that you’ll have to pay tax on the money you earn, wherever you earn it (and, as we discovered last time, whenever you earn it!), but you shouldn’t have to pay tax on it twice!

Graham went on to explain that statement in ‘accountancy speak’.  “Double Taxation Treaties are conventions between two countries that aim to eliminate the double taxation of income or gains arising in one territory and paid to residents of another territory. They work by dividing the tax rights each country claims by its domestic laws over the same income and gains.”

In other words Governments have spoken to each other round the world – and not just in the EU to answer Rachel’s question about the difference between EU and non-eu earnings, and agreed that  their citizens shouldn’t be taxed any more often than is absolutely necessary, as Graham went on to explain. “Over 2,500 Double Taxation Conventions exist world-wide. The UK has one of the largest treaty networks with over 100 currently in force.  There is a list of current UK treaties in force on the HMRC website at www.hmrc.gov.uk.  The underlying principles surrounding double taxation apply irrespective of whether the foreign country is an EU member or not.”

What that means for you is that you may need to disclose this income in a different section of your tax return dealing with ‘Foreign Income’ rather than UK income, as Graham explains. “From a practical perspective, the income earned overseas will require to be declared on your UK tax return as foreign income.  On the return you will be able to claim relief for the overseas tax already paid.  One important point to note there, however, is that the relief will be restricted to the level of tax paid in the UK on an equivalent amount.  Accordingly, where the overseas country’s tax rate is greater than the rate of tax you pay in the UK, there could be an element of “double taxation” which cannot be recovered through your UK tax return.  Generally the tax treaties are such that your combined tax bill should be no more than the amount you would have to pay in the country where the higher tax is charged.”

There are countries where no double tax treaties are in place and if you earn money that is taxed over there then you may need to act before you come home from whatever tour you are on. “If there is no double tax treaty between the UK and the foreign country, a claim for “unilateral relief” should be made.  This involves claiming relief on the lower of the foreign tax suffered or the UK tax due on that income but only applies in cases where there is no treaty in force.  In order to claim the Double Tax credit you must get a certificate of tax deducted from the overseas authorities,” says Graham.

What’s the right phone contract for me?

Mobile phone contracts are a huge cause of confusion and concern for many of us – and I say that as someone who has just picked up the tab for his son’s lack of understanding of the cost of sending text messages from Rome a few weeks ago. I don’t know why it was that his contradictory justifications of “It’s okay they’re all inclusive” or “It’s okay they’re only 10p each” set the alarm bells off but my concern was well placed when the bill arrived yesterday and made me think that a reminder on the pros and cons of mobile packages would be worth a minute of your time.

There are so many mobile options from so many different providers that this piece is not about telling you where to get the best deal. Instead it’s about helping you ask the right questions and read the right parts of the terms and conditions so that you know what you’re letting yourself in for when you look to organise a new mobile contract.

And I suppose the starting point is whether you want, or need, a contract at all. It may be better to look at some sort of pay as you go option, where you only pay for the calls and text messages that you make and send. This is a great way to control your costs since you can only use your phone when you have credit on it, but you may end up paying more for each call and text than if you had a contract. And you will almost certainly have to pay more for the handset that you use. Oh and if your credit runs out just as you are about to make that all important call to confirm a lucrative contract, or arrange a night out, then you might have a problem.

A pay as you go deal is likely to be more suited for a light user, or if you really need to control costs monthly. If a contract looks like a better option then you need to be aware of the length of the contract and what the penalty will be if you want to get out of it at some point. The shorter the contract term the better in terms of flexibility but you might find that you might need to trade flexibility for lower call costs, or more inclusive minutes and texts.

Whether you are looking at a pay as you go deal or a contract you will need to know how much you are going to have to pay for each minute that you use and for each text that you send.

Some deals will let you call certain numbers free, and the flip side of that as we hear with every telephone competition on television now is that some numbers can be really expensive to call , so be aware of what you’re paying for different numbers. And, really important here but check out how much it’s going to cost you to access emails and the internet. A lot of contracts will allow a certain amount of download within your contract but then charge, so ask your provider if they warn you when you’re getting close to your limit.

And lastly, to go back to the beginning, check carefully how much you’re charged to make and receive calls when abroad – yes you will be charged every time you answer your phone. You may even be charged if your message service answers for you! And switch off any roaming facility if you don’t need to use it. If you’re abroad and making calls to the country you are in then why not consider a local SIM card. They can be flexible and much cheaper than taking a UK phone abroad with you.

Rachel’s Diary update

Great to hear so much positive feedback from Rachel Hair’s first diary entry last week. It’s clear already that Rachel is raising issues that have taxed the minds of a lot of you for some time, but that you’ve never really known where to go for answers. Hopefully Moneysucks? for Musicians will provide some of these answers for you. Rachel and Fergus were interviewed by Bruce MacGregor on BBC’s Music Café this week and if you missed the piece then you might still be able to catch it here

Rachel told listeners about some of the problems she faced as a travelling musician and why she felt that writing down these problems would help not just her but lots of other working musicians as well. It seems that this is going to be the case since already lots of you have been telling us that it’s a great idea and you’re looking forward to reading Rachel’s Diary.

The next edition will be out early next week and will continue down the tax road, as well as looking at the thorny subject of double taxation agreements.

If you have any specific queries that Rachel hasn’t covered yet but that you would like answers to then please drop us a line.

Rachel Hair’s 1st Money Diary

Welcome to the first ’episode’ of Rachel’s Diary. What follows below is Rachel’s account of a recent trip to Belgium with some tax questions that it raised for her. We have then answered these questions for Rachel but in a way that we hope will benefit all musicians who have an uncomfortable relationship with HMRC (otherwise known as The Revenue!). Find out more about Rachel and her music at www.rachelhair.com or http://tinyurl.com/6fzw5uu

I was over in Belgium last week with the Rachel Hair Trio playing a set as part of the “Gaelic Crossroads” concert in Lommel, near the Dutch Border. What a trip….we were so well looked after and the gig was almost a sell-out.
We received a good fee for the trip on top of all our expenses (flights, accommodation, transfers) being covered so financially, as well as musically, the trip was a great success.
As usual we, or rather I on behalf of the trio, got paid in Euros, having invoiced my agent who then in turn invoiced the promoter with his fee on top of ours (how much we pay our agent may be the subject of a future piece!)
Since I am the financial brains of the organisation (difficult to believe I know) it’s normally me who gets paid and then I pay the other pair, normally emailing them an official “receipt” (if that’s the right term) to confirm that I’ve paid them for the stated gigs. If work is done in the UK I normally pay them by BACS from my own account, but more often than not if we work outside the UK we get paid in cash, so I pay them cash.
Right now the euro is very strong against the pound so we really appreciate getting paid in Euros. The race is then on between the three of us to try and find the best buy-back exchange rate. Once I’ve exchanged the Euros I keep the bureau de change receipt stating what the exchange rate was so I can add my fee in pounds into my accounts.
When travelling we ate while at the airport on the return journey in Brussels, and I kept the receipt for this having paid in Euros. When putting it into my accounts I normally would take the final exchange rate that I got for changing my fee when back in the UK and work out what I spent in pounds, putting that amount into my account.
However on occasions I’ve used my credit card and then looked at my bank statement for what their exchange rate was and put that in, when paying my card.

So here are my questions from last week:

Is it okay to work with exchange rates at the time we get back or should I look for rates on a specific date, or historically?

Do I need to make a note in my accounts of exchange rates each time we change money, or is the receipt enough evidence?

Should I be putting a note of the Euros I got paid as well in notes to my accounts?

What happens if we are investigated and HMRC discover that we have been paid different amounts for the same gig because we all got different exchange rates when we changed money?

Moneysucks? spoke to Graham Faulkner, tax partner at Chartered Accountant Abercrombie Gemmell and asked him for his take on Rachel’s issues. We agreed, first of all, that Rachel has done a good job in the way she deals with the other members of her trio. Too often we hear of musicians who get paid for work and pass out cash to the others involved without any paperwork changing hands .This leads to confusion and can cause issues with HMRC since, if we take the situation Rachel described above, in the absence of receipts showing that Rachel has paid the other members of her band then HMRC could think that all of the money paid to Rachel by her agent was her income, and tax it accordingly.
Graham thinks that the most important thing for Rachel to do in her dealings with the revenue is to create a clear paper-trail for them to understand. “In Rachel’s circumstances, the key consideration will be to keep sufficient records to tie in the actual exchange rate when preparing her tax return. I would have thought that simply retaining the paperwork from the Bureau de Change would be sufficient. At this level, I would not overcomplicate matters by worrying about notes in your accounts regarding the rates.”
In terms of the exchange rate differing day to day, Graham reckons this is not really a problem as long as Rachel’s paperwork confirms the amount she received but says that help is available on this issue. “HM Revenue & Customs publish monthly lists of the official exchange rates for use in preparing tax returns, and these can be found at http://www.hmrc.gov.uk/exrate.”
Graham is not too worried about any variation in amounts paid to different members of Rachel’s trio. “Similarly, it is less important to marry up exchange rates between the band members, provided that the amounts are being returned to HMRC in accordance with the actual amounts received on exchanging the Euros on your return to the UK.”
So all in all it looks as though Rachel has grasped the basics of this issue and if she takes Graham’s advice on board her tax return should be easier to complete next year.
Graham does raise one other important issue that is relevant to musicians, and others, working abroad. “One consideration that should not be overlooked is the potential taxability of these earnings in the relevant European jurisdiction. Strictly, I would expect you to be liable to Belgian tax in relation to your activities there.”
This raises the spectre of the ‘double taxation agreement’ and the need to understand where tax is due to be paid when you work overseas. We’ll come back and look at this one in more detail next time!

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