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Thread: Self Employed, Video Production & TAX

  1. #1

    Default Self Employed, Video Production & TAX

    I was talking to my wife the other night about an idea I had which was to use the tax man to pay for my Video hobby.

    As most of us know this can be a very expensive hobby so I came up with the idea of creating a video production company which will obviously make a loss, unless I get extremely lucky as I won't have any paying clients. I thought I could offset the cost of equipment, filming costs etc against my main income self assessment tax bill.

    Is this a good or bad idea, will it work ? Is it legal ?

  2. #2
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    Quote Originally Posted by Midnight Blue View Post
    I was talking to my wife the other night about an idea I had which was to use the tax man to pay for my Video hobby.

    As most of us know this can be a very expensive hobby so I came up with the idea of creating a video production company which will obviously make a loss, unless I get extremely lucky as I won't have any paying clients. I thought I could offset the cost of equipment, filming costs etc against my main income self assessment tax bill.

    Is this a good or bad idea, will it work ? Is it legal ?
    Have you ever watched the movie "The Producers" by Mel Brooks?

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    Over simplified.

    I certainly funded my music hobby that way. Short term it doesn't really work, but over the years it will. Having said that I started to earn money (not serious money, but regular pocket money adds up) so still ended up paying a bit of tax on the music money.

    Basically, you have a capital investment and outgoings.

    Capital costs are you equipment. (Plant & Machinery)

    You have little in the way of overheads (no premisies - though you might argue you use part of your house for trading/studio but be VERY careful of this or you might cop for business rates)

    You can't claim for this all in one year - rather you depreciate their value over a number of years (five is typical) and claim for the depreciation.

    Outgoing are your expenses and costs of sale.

    Cost of sale is cost of hiring equipment, actors etc.. (so nothing there really)

    And you'll have expenses (tapes/DVDs etc) ie costs incurred that aren't attributable to any particular/specific job or project.

    However, you do need to generate an income. You can only offset your costs against income generated from this. If you create a loss, you can't claim money back from Alistair against your income from other jobs.

    So just generating a loss is of no use to you whatsoever.

    Hope this helps
    Tim

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    Whilst you may be right Paul your logic does not make sense. If HMRC treats you as two different people then they cannot possibly offest the losses of one "person" against the income of the other!

    Thinking about it, when you complete your tax return, you are expected to enter income both from employment AND self employment so it might be possible. Though my accountant, whilst keen I should set up two independent businesses years ago one VATable and the other not (it was dubious so I declined) never for one moment suggested I could offeset losses in one against the other.

    I have little doubt any accountant worth his while will be able to show you figures which suggest he is saving you more money than he is costing

    Midnight, it might be worth talking to HMRC. It's quite a legitimate question to ask "I'm thinking of earning some extra money from a part time video business. If that makes a loss can I offeset that against my main employment earnings?"
    They'd be obliged to give you an honest answer and it won't cost you.
    Tim

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    My only comment would be: if you could do this, why doesn't everyone do it? My advice? Seek professional advice and consult HMRC.

  6. #6

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    Thanks for the in put guys. I would never consider doing anything without taking advice from my accountant. I've been self employed/Business owner for nearly thirty years so I have some understanding of how it works. Apart from the obvious. "They screw you at every opportunity". I think there is some mileage in this idea.

    By the way you are both (Tim & Paul) right about how the TAX Man treats people as individuals or two individuals. First to them you are an NI No., this is then split into sections PAYE and Self Assessment. Most people fall into one or the other but some people like myself who owns a Limited Company is employed by the company being paid a small wage which is dealt with by PAYE section. The majority of my income is from Dividends payed to me as a shareholder of the company. The is dealt with by the Self Assessment section. I am also in a separate partnership which owns the property that my company rents. (*Note: I am not a millionaire*) it just sounds a lot grander than it really is.

    Once all the calculations have been done it all goes back to the central "You are a number" section who make sure I pay them what they think I should.

    So having said all that, I do think there could be some mileage in the idea and possibly for others to see if it would fit their situations.

    AND Digger yes I have but I would never be that lucky.

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    Maybe I'm one in a million but I actually find the tax man helpful! Just ring him up and ask. Quite often I've 'phoned with a "I'm thinking of adding this string to my bow, what d'ya reckon? Can I set it off against earnings?" test of the water and I've always found that they play the game, sometimes making better suggestions than my accountant. The main thing is that you can justify it. Which, when it comes to any trade involving "media" means that just about anything goes!

    Also it's free and doesn't involve a "Can you come in and talk about it" discussion with the accountant which goes on the bill.

    In the worst-case scenario they just say "no"!
    Last edited by Rembrandt Rob; 05-05-2010 at 07:32 AM.

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    Quote Originally Posted by The Gaffer View Post
    Maybe I'm one in a million but I actually find the tax man helpful! Just ring him up and ask.
    Same experience here.
    Tim

  9. #9

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    I've just spoken to my accountant who said that I can claim 100% of my set up costs for the first year. Which is good news. The main point he stressed with me was that the revenue will see that it is a proper business and not just a hobby. He recommended that I keep correspondence to show that I am trying to get distribution deals or trying to sell the work. BUT I don't have a clue how to start that kind of thing. Who would I have to right to say I've made a film do you want to distribute it ?

    Would I, for example send a DVD of Street Songs to MTV and say would you like to play this on your TV channel and give me a fiver for doing so?

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