As a Director of your own limited design company there are a number of expenses that you can claim against your tax bill. Having an expert knowledge of creative industry tax and you’re filing obligations and exemptions can save you thousands.
Expert in Tax for Design Businesses
It is essential that the expenses you claim tax relief on are directly related to your contractor business and are classified as tax-deductible
Why a design professionals taxes are never simple
As a design professional there are many facets to your income and expenditure, which differ incredibly from those of, say, a plumber or even a writer. This means filing tax returns for the design industry can be a laborious process.
'WHOLLY AND EXCLUSIVELY'
Legally, taxes claimed must be 'wholly and exclusively' for the purpose of work. However, the HMRC view design professionals expenses as a very 'grey' area. For example, many of a design professionals expenses will be part-work, part-personal related and therefore will need to be apportioned.
Ultimately, as with many other creative professionals, everything a design professional does can be related to their work. You have to know what is going on in the world of art, media and television- as well as subscribe to magazines, attend social gatherings, networking events and not to mention trips to work-related event. However, as with all matters tax, design professionals need to tread carefully when filing a tax return.
Tax is payable on 31 January and 31 July. If we were all perfect we'd all have put aside enough to settle our liabilities and it's be a straightforward process, but for design professionals, often the payment due on 31 January is the killer, since a design professionals taxable income is often unpredictable and inconsistent and you may have to cope with spells of unemployment. You don’t need to be an accountant to understand that basing a tax return on last year’s income, usually bears no relation to the actual income earned.
Plainly, because income from a profession in the creative industry can fluctuate so wildly from year to year, it really pays to put some money aside as you go along.
Below is a list of some of the expenses that are claimable for limited design businesses:
If you operate outside of the IR35 legislation or operate inside the IR35 but will incur an expense for non-ordinary travel i.e. to the shoot of one of your design projects, you will be able to claim mileage expenses through your limited company related to the use of your own vehicle for business travel.
For the 2017/18tax year, the claimable amount for cars and vans is 45p per mile on the firm 10,000 miles in the tax year, and 25p per mile on each additional mile.
When using public transport, you must only claim expenses related to business travel if you operate outside IR35 legislation or if you are inside IR3r, you are making a non-ordinary business related trip.
Home office costs
If you run your limited design business from home or it is where you do the majority of your work, you are entitled to claim a percentage of gas and electricity bills, metered water costs and business phone bills when using a residential telephone line. These expenses will be apportioned accordingly with the portion of time spend in your home for work-related purposes. You can also claim a percentage of the tax on your mortgage or rent.
Start up funding
Start-up companies can receive help from the government in attracting new investment.
Investors in start-up companies could claim 50% of their investment back through tax relief.
The Seed Enterprise Investment Scheme (SEIS) will allow investors who invest up to £100,000 to claim the 50% tax relief.
In addition, the other advantages are:
If the investor makes any gains in the 2012/13 tax year, the tax can be deferred if the proceeds are invested in SEIS
If the investment is held for at least 3 years, there is no tax to pay on any gain made
The scheme should enable start-up companies to attract more investors by emphasising the tax advantages.
Another point to mention to potential investors is that tax relief through SEIS may be more attractive than tax relief on pension contributions for 50% taxpayers (which are now limited).
If the start-up company needs more than £150,000 (the total allowed for the company) there is still the Enterprise Investment Scheme (EIS), which allows for 30% tax relief for the investor.
If you are a start-up looking for investment, let us know and we can talk you through setting up SEIS or EIS.