It’s all too easy to get lost in your taxes as a creative professional. With often more travelling and longer hours, it can be hard to find the time and resources to properly sit down and focus on where you and your business stands in relation to the HMRC.
This article focuses on bartering- the exchange of a good or service. Bartering is extremely common for many creative professionals. For example, if you are a graphic designer and you perform a design service for a catering business in exchange for their services at an event you are holiday, this would constitute ‘bartering’.
If you have any questions throughout this article, or if you would like any help with your tax return, contact us.
Notorious in farming the concept of bartering has thrived over the centuries. The HMRC regards such and any bartering exchange as income and expense. The value of bartering is considered as having monetary value and therefore must be recorded correctly in order to stay in line with the HMRC’s requirements. There are a number of factors that you must understand and evaluate when looking at bartering income on your tax return. Firstly, was the exchange ‘pure barter’?
Pure barter is where the value of the services/products on each side of the exchange is equal in value. Truly equal barter is very rare. In many cases there is partial barter, where a smaller value of money is exchanged between parties. The HMRC will evaluate the value of each side of the exchange based on the usual fees of the company for that same product/service.
Not recording barter exchanges is a very easy mistake to make. However, it is important to install measures to ensure that you record exchanges in line with the HMRC’s requirements.
The service or products must be recorded at market value and a contemporaneous sales invoice with the usual invoice number and date as your typical invoices if not done under bartering.