Freelance.... Or Not Freelance???

[SparkySteve]

As a young and enthusiastic LX tech, the amount of workload has sharply risen over the last six months or so and was wondering what are the advantages or disadvantages of going freelance are. I currently work on a casual basis at my local theatre where I work on average 24 hours a week... sometimes more, sometimes less. I also do bits and bobs on the side for other theatres in the north east and some national companies. would I qualify as being a freelancer and what would I have to do about tax :P and NI?? its all very confusing!! In september I'm relocating to kent where I'll be attending rose bruford college on the lighting design course and I want to get everything sorted before I go. would it be an advantage to me??

 

thanks

Steve.

[richard]

Going freelance does not neccessarily mean that all of the work that you do will be on a freelance basis, many theatres insist on their casual staff being paid PAYE, not as freelancers, which is well within their rights to do this as they can get into a lot of trouble if they start paying people as freelancers when they are doing work that may not constitute it..

 

Before going freelance you should look at your clients and see what they would like. If you are only doing a few invoicing jobs then you do not neccessarily need to go the whole hog as freelance - bear in mind that it can involve a lot more paperwork.

 

You can also get a Schedule D (or UTR or whatever) at any time, which is worth doing, without using it much for invoices.

 

I dunno if this makes sense

 

Richard

[Stu]

Steve,

 

Lightnix would be a good person on this board to speak too... perhaps trying doing a search as I think his pearl's of wisdom are already on this site somewhere!

 

HTH

 

Stu

[Guest lightnix]

My previous comments on this subject are in this thread. They were a little brief, so let me expand...

 

In the strictest sense of the word, a "freelancer" is somebody who works for a number of different clients on a short term basis. However, in this business practically all "freelancers" (outside of Theatre and TV) are Self-Employed people.

 

I assume (correct me if I'm wrong) that at the moment, as "casual" crew (a term I despise) the theatre companies for whom you work deduct your Income Tax and NI at source, classing you as a Temporary Employee in the eyes of the Inland Revenue. As such, your employers are responsible for providing your tools (except small hand tools), safety equipment, insurance cover and "specialised" training, i.e. working at height, driving cherry pickers, etc.

 

The advantage of this situation to you is that all the money you receive is yours, to spend as you will, with few additional expenses. As you are probably being taxed under Basic Rate (BR), you may well be entitled to tax rebates from time to time. Your employers will be paying Employers NI on top of your deductions, which will boost your (admittedly dwindling) state pension rights when you retire. They are also responsible for ensuring that what you do is safe. As a Temporary Employee you can also accrue Holiday and Sick Pay rights.

 

"Going freelance" is often seen as a romantic, care-free lifestyle, but practically nothing could be further from the truth, especially these days.

 

When you are working as a Self-Employed person, you agree a price for each job and send an invoice for that amount at the end of each job. This price should include all "extras", such as travel. At the end of your tax year, you add up all your invoices to see what your Gross Pay has been. Then you take all the receipts for expenses you have incurred in the pusuit of your business over the last year, add them up and deduct this figure from your Gross Pay to give your Nett Pay. You then pay Income Tax on the Nett Pay, along with 8(?)% NI. In addition to this you pay something like £7.50 per week in Class 2 NI, usually by direct debit.

 

The advantage to you in this case is that you can wind up paying far less tax than "normal" people. For instance: I might make £25,000 in a year, but after deducting my business expenses only pay tax and NI on £15,000, although this means that I will have had to spend £10,000 on my business. I will also need to save a portion of my income to meet the tax bills I will have to pay at the end of each January and July. This year I had to pay £1,900 in January and have £1,500 to pay at the end of this month.

 

The disadvantage is that you become responsible for many things that would normally be dealt with by your employers, all of which cost money. To begin with, anybody who wishes to become Self-Employed will need to engage the services of a qualified accountant, to prepare their annual accounts and deal with the Inland Revenue on their behalf. This can easily cost £500 or more per year (although the accountant's fees will count as a business expense). They will need to provide their own Public Liability, Travel / Medical, Indemnity, Employers and any other "professional" insurance that they may require. It just cost me £525 to renew my policies this year, up from £350 two years ago and set to rise (and rise) again in the future.

 

Self-Employed people are responsible for providing all their own tools and safety equipment (gloves, earplugs, goggles, hi-viz vest, steel toes, climbing equipment, etc.) and ensuring that they are properly trained in their use. In a nutshell, as a Self-Employed freelancer you and you alone are responsible for the life you have chosen.

 

Self-Employed people pay the minimum in NI contributions, in return for which they are entitled to minimum state pension rights. Anyone thinking of becoming Self-Employed needs to look at getting some kind of private pension plan in place. Self-Employed people have no entitlement to Holiday or Sick Pay or Mat/Paternity leave. The bottom line for Self-Employed people is that a day without work is a day without pay.

 

Market Forces play a big part in how much work you get to do - if there are no shows going on, then there will be no work for you to do. The general opinion is that there is an over-supply of freelancers at the moment, with too many people chasing not enough work most of the time, which leads to downward pressure on freelance rates. There have been a few stories recently, regarding one company in particular, who are alleged to have been approaching other companies with the suggestion that freelance rates are too high and need to be brought down, with an invitation to help them achieve this goal. Fortunately (at the moment, anyway) this invitation has been declined.

 

There is also the perennial problem of getting paid on time. The "standard" terms of payment for freelancers are thirty days and although there are some notable exceptions, many companies sadly think it is perfectly acceptable to keep their crews waiting two or three months for two or three days money. If you have a problem with that, then go work for somebody else. I've lost count of the times when I've been owed literally thousands of pounds for the work I've done, but have been unable to even get a tenner out of the hole in the wall because I've exceeded my overdraft limit, have had to start living off my savings and had all my pleas for payment ignored, with the veiled threat that if I want to make a (legal) fuss about it, then fine - there are plenty more where I came from.

 

I'm sorry if this is starting to sound negative, it isn't all doom and gloom - honest. Freelancing can be a very rewarding career, with a fantastic variety of work and huge potential to travel the world and stay in (generally) nice hotels at other people's expense. But it can also be a huge pain in the bum, with no job security, little gratitude and no feedback as to your reputation with a given company, other than the 'phone ringing or not ringing again and a few whispered rumours. Don't forget the saying: You are only as good as your last gig. It sucks, but that's showbiz.

 

Finally (phew!), at the risk of sounding patronising (which is not my intention), I would say that as you seem to be in the earliest stages of your career, it would probably be best for you to put all thoughts of "freelancing" to one side for the time being. You will have enough expenses as a student without having to worry about insurance, accountants, etc. Concentrate on your course (all the best with it, by the way) and pick up casual work where you can to fund it and gain experience. If you stumble across any freelancers along the way, buy them a pint, chat to them about their experiences and see what further opinions they can offer you.

 

If, one day, you decide that freelancing is the path for you, then go and see an accountant immediately, get in touch with people like Business Link and your local Citizens Advice Bureau. The best thing to do after that is probably to get in touch with local crewing companies for humping / loading work and lighting hire companies for any warehouse / load out opportunities. That way you will get to learn to walk before you try to run and have a chance to learn a bit about the business before it takes you for too much of a ride.

 

Useful links:

A guide to the Inland Revenue IR56 regulations, which govern who is an Employee and who is Self-Employed

 

Business Link

 

National Association of Citizens Advice Bureaux

 

Hope this has been of help :P

[NickLee]

Regarding the financial part of being freelance - I've a friend who's a professional performer, and he is clearly considered "freelance" by the IR. His accountant charges very little to do all his taxation and accounts for him - really, it's surprisingly cheap.

And because he is a performer, he can claim back all VAT on new shoes, clothes and so on by just saying they are for work. As a freelancer, any tools you buy, black clothes or anything that could PERHAPS be for your work is tax-deductible.

 

But that's just an aside to the main issue.

[James C]

As a freelancer, any tools you buy, black clothes or anything that could PERHAPS be for your work is tax-deductible.

You have to be careful here. The IR won a case against a barrister once, who claimed for formal clothing, which was very different to her usual attire. The judge felt that as she would now have less wear and tear on her usual, flamboyant clothes, then technically even the sober clothes were providing her with personal benefit=>not solely for business use=>taxable (There were other, similar arguments that led to his ruling)!

Incidentally, I read somewhere (may have been Self-Assessment guidance notes, actually) that any clothing that may have a purpose other than work is not deductible - so Steel Toe-Caps: good, Black T-Shirts & Socks:bad!

I think all any of us can do with this sort of thing is trust our accountants' advice, so that when IR disagree that black jeans are deductible, you can at least say they told you so!

[Guest lightnix]

...any tools you buy, black clothes or anything that could PERHAPS be for your work is tax-deductible.

Not quite. James C is right - you do have to be very careful. You and your accountant can "say" what you like, but the Revenue may well disagree and often do these days. Tax deductible expenses are supposed to be those incurred WHOLLY in pursuit of your business and the Inland Revenue are very hot on what they call "Duality of Purpose" - things that can be used both in your personal and professional life. What this means, for instance, is that you should not use your work tools for domestic odd jobs - you should have a separate set of "home" tools for that, the cost of which is not tax deductible.

 

Back in 1997, with the introduction of Self Assessment, the Revenue won the power to carry out investigations into people's finances at random, previously they needed "reasonable grounds" to do this. I got investigated last year over about £1000 worth of expenses. My accountant fended them off admirably, but it took six months. They seemed particularly interested in what I was claiming for travel and some of my claims for tools, etc. They tried to argue that things like steel boots and hi-viz vests could be used as party or club wear and were therefore not claimable under the Duality of Purpose rules (my accountant told me that they have tried this one before with other clients). Strangely there wasn't a squeak out of them about all the CDs I was claiming for, even as a lampie.

 

Another thing they can get sticky about is subsistence expenses, i.e. the cost of your meals while working. They say that as humans need food to survive, meals are not claimable. I argue that the cost of eating in the middle of London or at a hotel is far higher than eating at home and so claim around 75% of my meal costs. However, if you do a job abroad practically everything you buy can be claimed as a business expense: every taxi, sandwich, cappucino, etc. So if you do any shows overseas, keep every receipt and claim for the lot.

 

What sort of ride you get from the taxman depends largely on which tax office you are dealing with, which in turn depends on where you live. Each tax office has it's own, slightly different interpretation of the rules and what is acceptable to one may be completely out of the question to another. The Revenue have become far more aggressive in their pursuit of "dodgy" expenses and most investigations, like the one to which I was subjected, are carried out by junior tax inspectors, who are hungry for promotion and don't get it unless they manage to recover extra tax in 75% of the cases they investigate.

 

On the other hand, there was a professional snooker player, who once managed to successfully claim the cost of the lager he consumed during matches as a business expense. Recently we have heard how luvvies and turns can claim the costs of their cosmetic surgery, so go figure :P

 

...he can claim back all VAT on new shoes, clothes and so on by just saying they are for work.

Only because he is VAT registered, which is another story altogether and once again: you can "say" what you like, it doesn't mean that the authorities will agree with you. Pushing your luck too far with VAT is certainly not recommended, as you are dealing with Customs & Excise, whose powers of search, arrest and investigation are staggering.

[SparkySteve]

well thanksfor all your help guys... I'm still unsure but I think everyone is always thinking "what if??" as you suggested I think I'll concentrate on my studies and see which way my career goes after that... it was only a thought after all! once again, thanks for all your help, and I look forward to the possibility of working with you in the future (whether as a freelancer or not... I don't know!) hehe

 

cheers

steve.

 

www.SparkySteve.co.uk

[James C]

... it was only a thought after all!

Thanks for raising it though - there are plenty of people (myself included) who have some idea what it means to be self-employed, but tend to hang on to odd snippets of conversations that become fact in our addled brains over the years, even though we can't quite remember who said what, and wouldn't have a leg to stand on when approached by IR, trying to rely on something a mate down the pub advised us about some years back!

 

Enjoy RB in September!

[SparkySteve]

will do!!... or at least intending to!! as a geordie, I'm intending on introducing a bit of geordie class to sidcup, kent. <_<

 

thanks for your reply... I feel that there's always gonna be a niggling at the back of my mind about this, but its good to hear what other people feel about the subject, asking people I work with I get the impression that there's a lot of people unsure what to do with their finances... I just don't want to be in a situation where I'm regretting doing something, or not doing it!!

 

cheers,

steve

 

www.SparkySteve.co.uk

[Rob]

will do!!... or at least intending to!! as a geordie, I'm intending on introducing a bit of geordie class to sidcup, kent. 

 

I´m not sure if that´s a good thing or not?! Anyway, we´ll have to see if you survive past freshers week!!