What are Allowable Expenses?

When HMRC calculate tax on your self employed earnings, they assess you on your taxable trading profits, rather than your trading income. Many performers don’t know where to start in identifying which business costs are allowable deductions and so overpay tax every year...

The guiding principal is that expenses which are ‘wholly and exclusively’ incurred in the running of your business are deductible for tax purposes, and if there is any ‘duality of purpose’ then the expenditure is either disallowable or apportioned between business and other use, where possible.

Sounds fairly simple, right? But as with many things to do with tax, the application of basic principals can be nuanced for different circumstances.

Take certain travel expenses - Can you deduct the expense of a train fare from home to a place of work?

Well that really depends…

Are you employed or self-employed?

If you’re employed, the journey is disallowable as ‘ordinary commuting’ (the principal being that you have chosen to live away from your work, so there is ‘duality of purpose’ in the journey).

If you’re self-employed, then is it a regular place of work?

A self-employed milkman claimed his travel expenses from home to a depo each day and the courts refused this deduction based on the predictability of his workplace (the duality of purpose above then still stands).

Do HMRC consider you to be an ‘itinerant trader’?

A plumber, whose ‘base of operations’ was determined to be his home, could deduct his travel expenses from home to each site, where he worked on a temporary basis. The courts decided that there would be no duality of purpose in such cases unless the trader’s home is in a different area to his operations (for example, living in London and working only in Cornwall).

So as you can see, a simple principle can end up being not so simple in practice.

The good news is that, in most cases, the work of freelance performers and musicians can be considered itinerant in nature, so you can often go ahead and deduct those journeys to work out your trading profit. Every case needs to be judged on its own facts though so, if you want peace of mind, then do get in touch.

As a performer, have you thought about deducting…

The cost of scores, plays and research materials?*

The cost of theatre and concert tickets?*

*These should be relevant to your profession, for instance, in preparing for an upcoming role. Tickets to the Abba Voyage hologram show for a classical basoonist unfortunately isn’t likely to cut it…