Saturday, 16 January 2016

HMRC Self Assessment Form. Serious Anomaly with Foreign Earnings

As a self employed sole trader stock photographer my accounts are very uncomplicated but as a serial procrastinator I have only just got around to completing my 2014-15 HMRC online self assessment form.

I use cash accounting and opted to submit a single payment for expenses.

The majority of my photo related income comes from two agencies, one based in UK, one in the USA.

Working through the online Self Assessment form I filled in the relevant sums and the page for UK earnings deducting the single expenses sum brings up a loss.

I have gone through the necessary rigmarole to receive my USA income untaxed and completed the foreign earnings section bringing me into profit.

Proceeding to the final calculation showing my tax owing revealed a figure higher than I was expecting. (I am in the 20% tax rate banding).

As an experiment I deleted the foreign income and move the same sum to UK income which then gave a much lower tax demand.

I rang HMRC's helpline and explained my situation. My call was "promoted" up a tier. After a lengthy and cordial discussion the advisor agreed with me that the lower sum was correct and advised me to ignore foreign earnings and put everything in UK earnings. I (gently) put it to her that completing the form correctly should give the right answer.

The anomaly (or error?) in the way tax is calculated is that if you opt for the simplified system then you cannot carry over UK losses to other income. At present the online calculation does not take foreign earnings into the whole income pot and taxes them separately, hence the higher "bottom line".

There must be many UK stock photographers with foreign income in the same boat . I asked the HMRC advisor to investigate this further and write to me with an outcome.

I would be interested to hear if this error is widespread and advise anyone affected to contact HMRC as I am not a Tax Advisor!!

Please feel free to share this with any individuals or groups who may be affected. Tweet and Facebook away!