Monday, 25 April 2016

Authors and money– Panama anyone? Moira Butterfield

A practical ‘author housekeeping’ blog today, folks. I’m assuming that, just for once, you don’t need my advice on rhythm, rhyme, teddy bear usage etc.

Instead I’d like to comment on the news this week.

“What?” I hear you say. “Has this blog changed tack? She’ll be mentioning celebrity shenanegins in a minute!”

Don’t worry. I have no intention of revealing the many secret shocking things I know about famous people. 

It was the Panama leaks that got me thinking, specifically the news that the Duchess of York had some sort of hidden offshore company to store the earnings of her ‘Little Red’ picture books. 
Er…I can’t remember them, to be honest, but nice to hear she made a few quid, if she did. 

(Aside - You never know with newspaper reports that celebs have earned loads from writing. Occasionally I’m told such reports might have a tiny touch of PR and therefore may not be entirely accurate…).  

But anyway, the papers went on to describe the Duchess’s finances as ‘chaotic’, so that is more proof that she’s a creative professional, surely! Bless.

But we really mustn’t be chaotic, people. Most writers are some way down the earning tree and therefore have to pay tax in the normal way, and that’s where I can help with some sage advice based on my own experience. You may spend your days having fabulous creative thoughts, but a small portion of your time must be spent getting your accounts up together if you earn money from writing. 

The UK tax people have been very interested in me over the years, and that’s good to know, isn’t it? As a self-employed author I may be a small-scale ‘sole trader’ but I could be stashing away the loot, after all. I've been tax investigated twice. On both occasions I had just had a baby and my earnings had plummeted. My accountant thought that might have triggered the investigations, though it's impossible to find out. Perhaps I was hiding earnings away in the nappy bin? They had a duty to find out. 

They could just as easily swing their never-sleeping eye over to you, and if you live in countries elsewhere I expect you have your own version of our UK tax friends.

For the first investigation I did not have investigation insurance, and it cost me £1,000 in accountancy fees. During a UK investigation you are interviewed more than once in a small room, like the sort of room you see on crime shows, and you need your accountant with you - and that costs money.

First piece of advice: In the UK you must get yourself investigation insurance if you have self-employment earnings. Check your position in other countries. You can get it from an accountant or, in the UK, from the Society of Authors if you are a member. Very weirdly, days after I wrote this blog I got an email from the SoA - if you want to go on their scheme for next year and you are a member you have to join by April 27th and it costs £12. 

Second piece of advice: You must keep your author earnings accounts up together and, unless you keep really accurate weekly records of all your incomings and outgoings, keep your work earnings separate from your personal spending accounts in some way. In the UK the tax investigator will want to look at work accounts going back five years, and all your personal accounts, too. If you can’t separate the two easily it gets complicated. I do keep mine entirely separate, and it was still complicated. You must account for every payment that has gone into your personal account going back five years. Unless you can prove otherwise it can be assumed to be work earnings you failed to declare. In other words, if Grandma once gave you a birthday cheque, for example, you may have to prove it came from her.  

If you live in other countries, you may not get these investigations, but I'm sure the advice still holds true - Keep your work accounts tidy. 

The thorough UK taxman did catch me breaking the rules.

In the first investigation he found one thing wrong - a packet of Opal Fruits and a £4.50 toy golf set on a petrol receipt that I had put through my accounts. I was rightly given a telling-off.

In the second investigation the tax lady said I’d claimed too much for travel because ‘writers don’t go out’, and though I’d recently written a series of round-Britain history books she wasn't having it so I was fined a small amount.  If I wanted to argue, she pointed out, she would take it upon herself to fine me for an assumed five years of over-claimed travel. So best not to. I can't tell you how much travel UK authors are actually allowed to put into their accounts, by the way. Nobody can tell you. It's up to a tax investigator to judge. Perhaps I should have offered mine an Opal Fruit...

So listen up. If you want to stay calm enough to write, you must keep evidence of your earnings in perfect order, ready for anyone to see. 

Don’t neglect this dull and tedious side of writing.

Unless your assets are offshore, in which case don't worry. You can do what the **** you like.   

Moira Butterfield 
@moiraworld
www.moirabutterfield.co.uk 

Latest picture books: 
The 'Everybody Feels..." series by QED 
I Saw a Shark - Ginger Fox 



22 comments:

  1. My tax inspector once told me that having an accountant increases your likelihood of being inspected as they assume people without an accountant are not smart enough to swindle them out of enough to cover the cost of the investigation. (That was quite long time ago - they are probably more desperate for the odd £4.50 now.) I don't have and have never had an accountant. I've been investigated by VAT (twice) who aim to do a spot check about every 10 years, I think, and one fairly soon after you've registered for VAT. It took about 3 hours and I scared the first one away by telling him he would have to get the earlier accounts out of the attic, and mind the spiders (I was pregnant and couldn't go up the ladder. You could buy a cushion and stick it up your jumper.)
    Just to clarify - insurance only covers the cost of the accountant and not of any fines or back-tax you have to pay.

    ReplyDelete
    Replies
    1. Yes. Thanks for that important clarification! The insurance won't pay any fines. It will only pay for the help you need navigating the investigation. In my case, as an utter accounting dullard, that help was needed.

      Delete
  2. I find numbers so, SO boring and confusing. I keep on top of my incomings and outgoings to try and make it easier on myself, but even though I'm good at keeping track I still find it a headache and a chore. And I've resisted buying insurance so far - you've given me the heebie jeebies, Moira. I'll hop to it. What a shame I can't afford the straightforward 'chuck it over to Panama and don't fret' option.

    ReplyDelete
    Replies
    1. I hate accounts, and find it horribly confusing, too. But I do my best to keep on top of my incomings and outgoings, like you, Michelle. It's a part of earning a living as an author, hence the blog.

      Delete
  3. I've been investigated once, years ago when I was earning very little indeed yet declaring it all, including the child minding I did for friends for cash. I was rung up and told that the tax people had 'found something'. What? They wouldn't tell. It was for me to confess. Since I'd no idea what it could be, we were stuck in that state for some time. Then they revealed their hand. I'd been 'earning' more than I'd declared from OUP for the reader reports I did. I'd not known that OUP's reimbursement of the postage costs of sending manuscripts back to them counted as 'income' to me. I'd thought it simply cancelled out the cost. I learned to put one as 'income' and the other as an 'expense'. That altered my declared income for that year by a bit over £100 ... and still didn't put me into the taxable bracket. I hate to think of the money they spent on that investigation!

    ReplyDelete
    Replies
    1. Glad to know they're so on the ball, eh? Hmmmm

      Delete
  4. I guess the thing is we all need to keep our accounts together the best way we can, even if we'd prefer to spend all our time writing. Boring subject, but actually a massive headache that will get in the way of writing if things go wrong.

    ReplyDelete
    Replies
    1. It's a really important subject, even if it is everybody's nemesis. It still shocks me to see the amount of authors on Twitter who confess to having forgotten to apply for PLR each year. I guess we all have stuff we'd rather be doing than admin - but I find there's always far more admin and more time to spend on it if I get behind.

      Delete
  5. I did see the Little Red Helicopter at Simon & Schuster's old offices - unbelievably dreadful. As for tax - God, that's scary. I'll call the SoA this afternoon and cough up the £12 - can't believe that tax stuff could be as trivial and nit-picking as this - what kinds of people work for them??? We must be easy prey, since we're not bankers.

    ReplyDelete
  6. A timely post, Moira. Thanks for the tip about investigation insurance. I've never been investigated but it seems like a sensible investment, especially if you are a SoA member.

    ReplyDelete
  7. Non SoA members can get similar insurance from accountants, or probably online I expect. As for setting up an offshore company in Panama, I suggest asking your local mafia how they do it, or perhaps writing to Number 10 : )

    ReplyDelete
  8. This is really useful. I ran straight to the phone and took out the insurance! Thanks Moira :)

    ReplyDelete
  9. Useful and terrifying. Presumably you can put down the cost of the insurance as an 'expense'... ?

    ReplyDelete
    Replies
    1. I reckon so, Lydia. It'd be a business expense, I think.

      Delete
  10. PS: Someone asked me how one would prove that money was a gift not a work payment. In my case I had to produce my Mum's building society book to show that she had given me a money gift (it was a couple of hundred, substantial enough to look as if it might be a work payment, not just a Christmas fiver).

    ReplyDelete
  11. Well you've frightened me enough to go out and join SoA for the first time (because I've got an agent, I didn't think it would be worth the expense as I wouldn't need their legal help for contracts). And you were the person I named who I heard about it from... which probably means you get a little gift from them as a thank you (bizarrely, *I* got something from the once for recommending it and I'm not even a member!). So MAKE SURE YOU DECLARE IT!
    I suspect it's out there somewhere on some forum but I'd love to have a talk with other writers about exactly how they keep on top of their accounts, because people will have such sensible tips that could be really useful.
    Thanks, Clare.

    ReplyDelete
    Replies
    1. Ho ho! will it be a big cheque? I think not ; ) My tip would be to have a separate business account - I've had one for years - but that's because I earn various amounts every month for fee-paying work. When it comes to investigations it's easier to show everything separately., But if you're very good and thorough at keeping account records (which I am not, on a personal level) it'd be ok to mix up.

      Delete
  12. Thanks for this post! I'm about to take a business start-up class tonight, from and accountant and a lawyer, and now I have a long list of questions!

    ReplyDelete
  13. Thanks for the advice. A bit scary - I'd be totally lost if I didn't have an accountant who is always reminding me to claim back things such as travel, parking fees etc.

    ReplyDelete
  14. Scared the **** out of me Moira, but very many thanks. Will get the SoA insurance straight away. It's the Room 101 treatment that really terrifies.

    ReplyDelete
  15. I have an accountant - have had the same one for years - and have had the SoA insurance too! Had to prove to the Tax Credits people that I was a bona fide author a couple of years ago and that was panic inducing enough. Somebody once told me that there are some accountants whose clients are investigated more than others - some have more of a reputation for abiding strictly by the rules. But also, sudden changes in income can trigger an investigation - and yet that happens to writers quite often.

    ReplyDelete
  16. Scary! Thanks Moira. I only wish Google and co were investigated as thoroughly as this.

    ReplyDelete