It may not be the most exciting aspect to publishing that novel you’ve been writing all these years, but you’ll save yourself a big headache if you get your taxes right. Knowing your tax obligations can help you avoid a messy scenario whereby you end up owing thousands to the taxman.
When you start out, there are a number of questions you’ll want to consider: do I qualify for the artist’s exemption? Do I need to register for VAT? Can I claim expenses?
It can be tough navigating these murky waters when you begin your career as a writer, so we’ve simplified these for you below.
From 2015, income earned by writers is exempt from tax up to €50,000 under certain qualifying conditions (the threshold is €40,000 from 2011 to 2014).
So for example:
You sold a book in 2015 and the income you earned from the sale was under €50,000. In this case it may qualify for the artist’s exemption.
If it qualifies, then you don’t need to pay income tax on it.
There are certain rules for the work to qualify:
1. You must be resident in an EU/EEA state and not resident elsewhere (there are some exceptions where you can get a formal determination once you take up residence in the EU or EEA).
2. The work must be an original and creative work and have either cultural or artistic merit.
A creative work in this case could be a book or other form of writing. It must be unique and a result of your imagination. So in this case a work of fiction would be considered a creative work.
If non-fiction is your thing, the work may still qualify as long as it encompasses one of the following categories within the terms laid out by the Arts Council: fiction, writing, drama, music, dance, mime, or visual arts.
For non-fiction, the content of the publication must be your own ideas and insights on the subject and so significant that it would be regarded as casting new light on the subject matter.
The publication comes fully within the terms of the Heritage Council.
The publication comes fully within the terms of reference of the National Archives.
Whether fiction or non-fiction, your work must also have cultural merit. In this case, it means that it enhances the quality of the reader’s individual or social life as a result of its intellectual, spiritual or aesthetic form and content.
Cultural merit could also mean that the content enhances the aesthetic apprehension of your readers.
Another condition to apply is that you must be registered as self-employed. Any exempt income is still subject to the Universal Social Charge and Pay Related Social Insurance.
Claiming the relief
You should submit an Artist’s Exemption claim form to Revenue along with samples of your work, evidence it has been published or sold, and any supporting documentation like testimonials from your editor, publisher, etc.
Most writers trade as self-employed, but if you have set up a company, any income you earn must be run through the company you contracted with your publisher and thus the income will not qualify for exemptions.
It may be more beneficial for you to be self-employed and use the exemption for any income up to €50,000, paying income tax on the balance. Professional tax specialists such as Taxback.com can tell you whether it would be more beneficial for you to create a company or remain self-employed.
You’ll need to register for VAT in Ireland if your income exceeds €37,500, but you can claim on certain business expenses to reduce what you owe. You must complete a VAT 3 return every two months and if your VAT liability is up to €50,000 then you can pay this by direct debit in monthly instalments.
When you are self-employed in Ireland, you fall under the category of self-assessment and are responsible for filing a tax return each year by the deadline of October 31 (November for pay and file). You risk late filing penalties if you don’t meet the deadline.
As a self-employed writer, you can claim on the cost of expenses incurred wholly and exclusively for the purposes of business. So for example you could claim on the cost of that laptop you bought for writing your new novel, but you can’t claim for all those muffins you ate while finishing the final chapter.
Personal expenses like food, clothing, accommodation, etc. cannot be claimed.
One potential refund you may be able to claim is that for Royalties. This usually arises when you sell your publication to readers in the US. You can read more about US royalty refunds here.
Examples you can claim:
- Accountancy fees
- Art Materials
- Training Specific to your trade
- Office/computer supplies
- Rent of business/studio space
- Professional/legal/accounting fees
- Agent commission
- Research – books, journals, subscriptions etc.
- Visits to museums/galleries
- Motor expenses
Keep your receipts!
It’s important that you keep all records such as receipts and invoices in case Revenue come looking for evidence. It’s recommended you keep them for at least six years.
You can claim these expenses on your self-assessed income tax return after the end of the tax year. Make sure you don’t file your tax return late because if you owe any money to Revenue, you may be subject to costly penalties or fines.
You can file yourself or use a professional tax preparer like Taxback.com. Using an agent can be especially helpful if you’re starting out or if you have complicated tax affairs.
If you’re employed under the PAYE system, then there may be other reliefs you can claim. For example if you’re a journalist, then you’re entitled to up to €381 in flat rate expenses.
- The Irish tax year is Jan 1- Dec 31
- The deadline for submission of your self-assessed tax return is October 31 following the end of the tax year in question
- The extended deadline for people who pay and file online is usually around November 15, e. just over 2 weeks after the paper filing deadline-this date will get earlier every year and is announced mid-Feb
- For help with filing your tax return or for a free, no-obligation refund estimate from the last four years, visit taxback.com
- You can go back 4 years for a tax refund, so applications for 2012 must be in by the deadline of December 31
(c) Ciara Kennedy