|
This article is in direct response to recent questions
and concerns raised on the "My Pole" Forums with regards to
whether or not dancers should be registered as self-employed, and what
this means for the dancer and the Inland Revenue.
There have been a lot of stories floating around of late
about clubs being raided, and dancers being fined and investigated, as
they have not been declaring any of their earnings from the clubs. I have
also heard a lot of rumours recently as well, that the Revenue are going
to target the "Adult Industry", as they have realised there
is a vast amount of cash generated within the various parts of the industry,
dancing just being one. I cannot say for certain whether this will happen,
although I do know historically the Revenue have always targeted sectors
where there is a high level of cash changing hands. A good example of
this is hairdressing.
More and more clubs are now getting their dancers to sign
dancer profiles stating that the dancers are responsible for their own
taxes and National Insurance contributions. If a club is investigated,
and they hold these declarations, they are not held liable for any of
the taxes applicable to the earnings of their dancers. Even when a dancer
is only working at one club, and therefore should technically be employed,
once this profile is signed the club can argue the dancer is dancing at
other venues and so employment is not applicable. The Revenue will then
enquire into the dancer's affairs, and if she is not registered as self-employed
then the trouble starts.
The penalties for tax evasion can be quite severe, especially
if you are claiming any form of State benefit as well. Indeed, benefit
fraud is currently looked at more severely than tax evasion. With the
introduction of the Proceeds of Crime Act (POCA 2002) and the Money Laundering
Regulations of 2003, a dim view is taken of any illegal earnings. More
often than not as well as recovering any assessed tax due, there is the
likelihood of a criminal prosecution.
Registering for self-employment is easy and straightforward.
There are a lot of people who view anything to do with the taxman as bad,
and something to be avoided at all costs. This is an understandable view
when you take into account the Revenue has a "guilty until proven
innocent" mandate. However, with the correct advice and a little
effort, it is something that in the long run will actually benefit you.
To register for self-employment you only need to complete
one form. It's called a CWF-1 and is available from the Contributions
Agency in Newcastle. Once it is completed you will be notified of your
self-employed status, and given a tax reference. The form asks for information
such as name and address, date of birth, National Insurance number and
when you started trading. This is the date from which you should keep
all your receipts for any purchase you make that is business related.
You will then start paying Class II National Insurance contributions.
This is a flat rate payment of £2 per week, which you can either
pay quarterly, or monthly by direct debit. Not a great deal of money really.
You are by law then required to complete a tax return form
once a year. The tax year ends on 5th April every year and soon after
this date you will receive your first return to complete. Don't panic
though! You have until the 31st January the following year to submit it.
However, it is always better to complete it in plenty of time so as not
to have it hanging over you. This you can either do yourself, or get an
Accountant to do for you. If you do it yourself there is a possibility
you may not claim for all the expenses you are entitled to, and no one
likes to pay more tax than they have to! For example, did you know you
could claim an allowance for the cleaning and laundry of your work clothes?
Also if you are dancing at venues as well as clubs, any props, wigs and
other materials, as well as costumes and make up are all allowable business
expenses.
You do not pay tax on the money you earn. You pay tax on
the profits of the business. This is your earnings less all your allowable
expenses. You can also claim an allowance for your car and computer, if
you have them. Car insurance, car tax, telephone bills are all allowable.
However the Revenue will expect to see an "add back" for private
use. This is the proportion of non-business use on the phone and car.
Typically a dancer with a "declared" earnings
of £20,000 per year can expect to pay tax of around £2,300,
assuming they have an average level of expenses to offset against their
earnings. For those dancers who earn less, obviously the tax will be less,
for those who earn more, the same rule applies.
Once you have a "history" life does get easier.
Loans and mortgages are easier to obtain if you are legitimate. Gone are
the days of buying many things for cash now. Unfortunately with the scope
of POCA 2002 being expanded in May 2004, by law now any large cash purchase,
whether it be a car, house, or even an item of jewellery, has the potential
of being reported by the estate agent, car dealer or jeweller. Although
the car dealer and jeweller in reality are unlikely to do this, I do know
of estate agents that have called in cases where they have been offered
cash for a property. Be warned!
I know of many cases where dancers have earned good money
in the years they have been dancing, but have had to spend it all, as
they have never declared any of it. The result? They come out of it with
nothing. I don't dispute that there will always be an element of cash
and the "black economy", but even if you are not declaring all
your income (it's up to you) it is always better to be semi-legitimate
than illegitimate!
Can you be employed and dance part time? Yes, you can, but
again, if you are caught not declaring any of your dancing earnings the
penalties could be harsh. Is it worth the risk?
In my experience it has always been a weight off people's
minds when they feel they have some form of legitimacy, and someone who
is in their corner giving them sound advice. There are more benefits to
being registered as self employed than there are not. It is not as difficult
or as expensive as people tend to think, and it can also open a lot more
doors for you in the future.
If you have any questions about the issues raised in this
article please feel free to email chris@mbmuk.com.
www.mbmuk.com
|