Freelancing help

[Thomas1987]

Chippy, I might be wrong on this so it would be good if someone could clarify, but the issue you're talking about it something called IR35. It basically says that you're either freelance, or you're employed. There's no middle ground, and you should be able to prove you are one or the other with no confusion.

 

 

 

How about people who are full time employed by a company, but do a bit of freelancing on the side. (i.e. during dark periods, when they are still getting paid by full time work, but no shows on...)?

[dbuckley]

The idea of IR35 is to prevent disguised employment, which effectively means that in reality you are an employee, but for tax purposes you claim not to be. Primarily aimed at computer "contractors", which is what I used to be.

 

If you "work for" multiple organisations, you are unlikely to be an employee.

 

If you have a full time job then you are an employee anyway.

 

If you need some light reading, click here.

[chippy2710]

1326324472[/url]' post='423685']

1326322769[/url]' post='423676']

It can seem complex and be aware that specific info may give the wrong impression. For instance;

either freelance, or you're employed. There's no middle ground

Whereas it is perfectly possible to be both for tax purposes. I pay PAYE on my pension and self-assess my self-employment. HMRC is great at helping people sort this type of thing out, use them. http://www.hmrc.gov....-business.shtml

 

Sorry I meant in regard to one company. It was my understanding that you couldn't be working for them and being paid on PAYE, while at the same time being self employed and invoicing the same company for other work?

 

My PAYE job is in a nightclub behind the bar and completely separate from this one.

[David Lee]

Only you can decide how much you need to make per job. £100, to me, is cheap but then corporate rates are far higher. Theatre pays low.

 

You could work out how much they would pay you per hour (before tax), multiply it by 8 or 10 (depends what you set your daily hours at). Factor into it extra if the event is not going to give you 8 hours between shifts for rest. Add in the fact that you will be sorting out (and responsible for) the tax and NI. You will be providing, at a minimum, public liability insurance, tools and PPE. so add some in for that too.

 

There is no such thing as "Freelancing" (unless you own a lance and a horse and live in the middle ages - and you don't look at your BECTU membership card). As far as HMRC are concerned, you are either self employed (be it as sole trader, ltd co. or whatever) or employed.

 

Do not forget the part about informing HMRC about your situation so you can get a Unique Tax Reference. Keep receipts for allowable expenses.

 

Make sure you sort out PLI before staring any self employed work and make sure the insurance company know what work you do when setting it up. If you never mentioned that you were rigging kit above heads then they may use it as an excuse not to pay or question what competency you have in that task.

 

If you do your quote right, you shouldn't lose out on money for extended days as you could specify that it is a cost based on being on site for x amount of days with no longer than 8 or 10 hours a day and a minimum of 8 hours between shifts. If it then occurs that you breach the agreed contract through no fault of your own, you could invoice for extra time and costs. (Of course the company using your services would have to agree with it, and if it is deemed to be unfair could be overturned in a court.)

 

Don't forget, when doing your quote, include any foreseeable extras - travel to venue, hotel and meals if not provided.

 

Obviously it is impossible to quote for everything - if you get a phone call in the morning seeing if you can get to a gig asap then messing about giving a quote, getting it approved etc will be a nightmare but you can always give a verbal quote followed up in writing at a later date...

 

If in doubt about the company, get a purchase order so if you have to fight for money you have proof that the company in question actually asked for your services.

 

It is a business so make sure you deal with it as such. Chase up money owed as soon as it falls into arrears and don't be afraid to use the small claims court if you feel you are getting nowhere (you will never work for that company again but may at least get paid :))

 

I know the last part seems a bit pessimistic but it happens so you may as well get into the habit of maintaing good cash flow and business practise from the start. Even though this will be in addition to your PAYE job you may find that it takes over so get it right at first rather than bumbeling through it (like I did :()

 

If in doubt consult an accountant who knows the industry/ self employment.

 

HTH and I am sure I will be put right on some points above so keep reading :)

[paulears]

As long as the self-employment is genuine and the worker can provide substitutes etc it should be OK.

 

I think this may be a snag for a huge number of us - we're called because people know we are the right people. It's the person, rather than the 'company' for us.

 

They want me, not somebody else - and if I stuck in reps like the muss do, I doubt I'd get many jobs back. The phrase about substitutes is just one of the blanket guidelines - and for many one-man band genuine self-employed people it is not relevant to what area we're working in.

 

I'd suggest that if you can prove you are genuine, then they (HMRC) will be happy. I've been inspected - and that was a very unpleasant stressful year, but they were quite happy with my status - which was quite complex. Self-employed, but with the odd bit of PAYE short term contract stuff. It's preventing 'pretend' self-employment to avoid tax and NI that they're really interested in.

 

In reality, even on here - we're pretty good at spotting people pretending to be in business. HMRC recognise 'hobby' businesses quite easily. I seem to notice them attacking the dodgy employers, rather than the employees first.

[dbuckley]

I'd say the most important facet in the theatrecraft business is to work for many clients.

 

As a counter-example, if you "freelance" for PRG five days a week, then that'll raise eyebrows as to why you are not an employee of PRG.

[chippy2710]

This is making my head hurt but I appreciate the help. It makes more sense than it did before.

[dynamo_ozz]

This is making my head hurt but I appreciate the help. It makes more sense than it did before.

Hi Chippy,

 

I was a freelancer up until a year ago with a PAYE job on the side. Firstly, you contact HMRC and get a UTR (unique tax reference) number. You'll effectively be declaring that, no matter you have a PAYE job/s on the side, you're undertaking self employment.

 

Get yourself a PLI. BECTU or ABTT provide cheap insurance. You might also want to take other types of insurance. It's up to you.

 

Decide whether you want to charge an hourly or a daily rate and create yourself an invoice template. Don't forget to add invoice term at the end (i.e. payment no later than 30 days). This invoice should include your UTR number, address, name, NI no, your client's name and address, hours/dates you have worked.

 

Keep all your receipts, i.e. meal expenses during work, your travel expenses, tools that you bought to get the jo done, even stationary you used, professional membership payments, insurance receipts etc. You can claim all these back.

 

I never had an accountant, I kept my own books. For each job I have done, I had folders, that I'd keep my expenses incurred from that job and also a copy of the invoice I sent to the client. End of tax year, I did my tax returns online and keeping my books neat helped a lot.

 

You can open a seperate bank account for your self employed income if you like to keep a better track of your freelance income. And make sure you put some money on the side for end of year income tax. It hurts a lot if you don't have that money on the side and taxman sends you a £500 bill. Not saying this will be the case.

 

I guess I am repeating a lot of things that other posters here already said, but hope this helps.

[zonino]

Chippy, I might be wrong on this so it would be good if someone could clarify, but the issue you're talking about it something called IR35. It basically says that you're either freelance, or you're employed. There's no middle ground, and you should be able to prove you are one or the other with no confusion.

 

I can write on about this area for years, but there is NO legal definition of freelance, its a really woolly word. HMRC essentially recognises two states:

• Self-employed
  
• Employee
  

 

a freelance is someone who works moves from job to job, BUT those jobs could fall under employee rules or self-employed rules. whichever payment route is used, you can still be a freelancer...

[gareth]

Just want to pick up on a couple of things in Oz's post ...

Get yourself a PLI. BECTU or ABTT provide cheap insurance. You might also want to take other types of insurance. It's up to you.

ABTT don't offer PLI to their members. In fact, there's nothing that the ABTT can offer to members which is of any use at all when you're considering a move into self-employment (with the possible exception of the occasional networking opportunity).

 

Decide whether you want to charge an hourly or a daily rate and create yourself an invoice template. Don't forget to add invoice term at the end (i.e. payment no later than 30 days). This invoice should include your UTR number, address, name, NI no, your client's name and address, hours/dates you have worked.

Invoicing for an hourly rate is an indicator that you're NOT self-employed. You ought to be quoting a fee for the job that you're doing, factoring in any out-of-pocket expenses (e.g. travel, accommodation) and invoicing for that amount. Do some Googling for IR35, and read carefully about what HMR&C consider to be indications of employment and self-employment. And you definitely don't need to put your NI number on an invoice - the only time you'd need to give that to someone you work for is if you're an employee and they're going to be paying national insurance contributions for you.

 

Keep all your receipts, i.e. meal expenses during work, your travel expenses, tools that you bought to get the jo done, even stationary you used, professional membership payments, insurance receipts etc. You can claim all these back.

No, not really. If you're operating as truly self-employed, you're running a business - and most of these expenses are part and parcel of being in business. You can make allowances for such things when you work out how much to charge a client for a particular job, but you can't claim them back from a client by invoicing for them. When's the last time you had, for example, some plumbing work done on your house and the plumber added something to his bill to cover the purchase of the tools he used to do the job?!

 

I never had an accountant, I kept my own books. For each job I have done, I had folders, that I'd keep my expenses incurred from that job and also a copy of the invoice I sent to the client. End of tax year, I did my tax returns online and keeping my books neat helped a lot.

Keeping accurate records of all your incomings and outgoings is a must, yes. But you really, really ought to get an accountant who understands a bit about the job you're doing and can work with you to make sure you don't pay any more tax than you need to. You mention things like travel costs, tools and equipment, and professional organisation memberships - these are just the sort of things that an accountant will be able to help you with when it comes to reducing tax liability.

 

If you're in any way serious about making a career as a freelancer in the entertainment business, your best route may well be to set up a limited liability company through which you provide your services. It costs a bit to get it up and running, but it's far better in the long run, especially if you have a decent accountant who can help you to run it for your maximum financial benefit. I worked that way for several years (selling my services through a VAT-registered limited company which paid me a salary and a yearly director's dividend), and it worked extremely well for me.

[chippy2710]

When you are doing a tax return you can obviously claim something back. Is this just the tax paid on these items or the full amount? Or does it depend on what it is?

 

What are the advantages of being VAT registered as my understanding is that up until a certain point it's suggested but not required.

[paulears]

This is why an accountant really is so sensible.

 

The thing to remember is that you pay tax on your profit. Genuine business expenses and investment in equipment to do your job reduce your profit - but there are some bits that get complicated. How about your car? You use it to go to the seaside for a day out which is NOT business - but you use it to take you and some equipment to a job, which is. HMRC recognise that a proportion of this is legitimate business expense - the same way you can claim a small amount for use of your home as a business. You can claim a proportion of your bass, electric and water bills if working from home too. The exact amount depends on you picking an amount that HMRC will find reasonable. They are happy with 50% of my electricity and 33% of my gas - for example, because I can show the reasons for this - and they accepted them. You could be different, but without proper advice, you can only guess.

 

As I get one regular client who always deducts 20% tax as just the way they work, it means that when the accountant does her stuff, I've already paid a big chunk of tax, and as I constantly use my excess income to buy additional equipment, building up stock - my profit is very low - and sometimes I actually get a refund!

 

As for VAT - the threshold is currently £73,000. Below this you can register if you wish voluntarily.

 

The main guide and again, an accountant is best to advise you - is that if you buy stock and lots of consumable products from VAT registered sources, and your clients are VAT registered, then even below the threshold, it's advisable to register. If you don't, you are more expensive, because your clients, if registered cannot claim back VAT on what they get from you, and you pay the full price on what you buy. It infuriates me when I buy from Amazon, and instead of coming from them, with VAT I can claim back, it comes from a non-VAT registered seller and I can't! Maybe Amazon were a few pounds cheaper, but if the VAT can't be reclaimed, it really costs more.

 

Remember that VAT shouldn't really be thought of as something you claim back - the Government get the VAT when the final domestic person has it - who cannot claim the VAT. All the others in the chain effectively pass on the tax. They pay it on what they buy, and charge it on what they sell - so in effect, it's the difference between the two that matters, and it works.

 

If you trade with non-registered people, then sometimes you will make less. Your mate quotes £500 to do a job, you do the same. If you have an invoice total of £500 and you are registered, then you have only charged £417. If you need £500 in your hand, you have to charge £600. Makes you more expensive than your mate. If the client is VAT registered you charge them £500 plus VAT, they don't care there's and extra £100 on top.

 

 

VAT isn't complicated, but it's just a bit of a pain - and of course, you need to remember to keep the VAT content safe, because 3 months later, you have to pay it over.

 

It's also handy to know that euro sources, like Thomann do not charge you VAT if you have a GB VAT number - which helps the cash flow I find. Big purchases mean a sizeable amount of VAT content spent, that you have to wait to recover 3 months later. Buying from them means if you sell on the equipment as part of packages, like I do, then you get the VAT content paid to you from the client, and it only cancels out at the next VAT return - just giving you a higher bank balance for the period - which is nice.

[gareth]

When you are doing a tax return you can obviously claim something back. Is this just the tax paid on these items or the full amount? Or does it depend on what it is?

You don't "claim it back" as such - you reduce your tax liability by offsetting legitimate business expenses against your earnings. Another reason why having an accountant is a good idea.

 

What are the advantages of being VAT registered as my understanding is that up until a certain point it's suggested but not required.

It depends on how your client base is made up. If the majority of your clients are VAT-registered themselves, then it's possibly worth considering going down that route yourself. You can add VAT onto your invoice for a job, which the client can then claim back ; and any VAT-qualifying purchases which your business makes can have the VAT reclaimed. However, if the majority of your clients are not registered for VAT, and you are, it won't be so good from their point of view as you'll have to add VAT onto your invoices (and give it to the tax man each quarter) while the client can't reclaim this extra expense.

 

Accountant.

 

;)

[mallyJJ87]

Hi Chippy- I've only been self employed for a year or so, but the best advice I can offer is; Keep records of all payments and expenses (I keep the hard copy and scan a copy also). Get PLI; BECTU includes it in the first years membership which is about £120). Read all you can on the HMRC website, and speak to a HMRC advisor if possible. I've had a mixture of PAYE jobs and freelance work for the past year and when I do my self assessment return at the end of the year, it tailors the form online according to my needs. I have a P60 from each PAYE employment, and invoices from every source of freelance work, which I then total. I then include any expenses (I didn't do that this year as I didn't get a huge amount in the way of freelance; it was mostly PAYE). Bare in mind that you can only claim expenses on the work you do self employed, and not PAYE. I've found NI contributions to be a little confusing when you're doing a mixture of PAYE and freelance work. Unless you earn less than £800 a year on a self employed basis, you will have to pay NI contributions as a direct debit and automatically from your PAYE employer. Finally, just be honest about it all; thats all HMRC are asking when you do self assessment. I'm still learning as well so if anyone else on the thread can contest my advice that'd be great as it'd set me straight if I'm on the wrong track :D

[folkieboater]

My understanding was that he was working for free in addition to his normal job and will now be paid.

 

Charge whatever you are comfortable with... £10 per hour for 9 hours = £90 for 1...

...

 

...

 

£10 per hour?

 

It says it's a freelance job, not a volunteer.