Unbanked Income/Unfair Calculations

[Fotoman]

I enjoy photography as a hobby and have been called upon by my friends and family on accasions to take photographs. (Weddings etc.) These I have done at extremely favourable rates, at cost or, indeed, free of charge. Any "profits" have been used to update my photographic and computer equipment.
I am now the subject of a tax investigation in which I have answered their queries regarding every item on my bank statements. I have proffered what I genuinely consider an amount of unbanked cash (£250) only to be informed that they think it should be £1,750 based on what a "like business" would do.
I do not regard myself as running a business and, as I am the one who has to prove to them that I have not received this cash, I am at a loss on how to proceed with this.
As a point of interest, my total "gross income" is only around £2,500, but they have decided to take my expenditure and work backwards using a figure of 80% GRP (a "like business") which in no way takes into account work done at zero profit or for charity.
I know this is only small fry to you guys but I would welcome any tips as I am now at the point of having to pay money I do not owe or lodge an appeal to the Commissioners.

[Simon Sweetman]

There is no simple answer to this - except probably decent professional representation. If you call me on 01394 274857 I would be happy to talk you through it.

[Fotoman]

I had a feeling that might be the answer. Thanks for the offer, I have a meeting with a professional early next week and was hoping someone had experienced this kind of situation in the past.

[Andy Wood.]

We've arranged for a friend to do our wedding photos so hopefully you're not he!

As Simon says, there are no hard and fast rules on this one. The case needs to be looked at on a balance of facts basis.

Prior to your meeting you can find out some of the indicators (badges) of trade at this address:

http://www.hmrc.gov.uk/manuals/bimmanual/BIM20200.htm

As you will see, profit motive is only one of many considerations.

Hope this was of help. Good luck!

Cheers

Andy Wood
Chartered TAx Adviser

awood@clbcoopers.co.uk
01204 551124

www.clbcooopers.co.uk

[Too much tax]

"only to be informed that they think it should be £1,750 based on what a "like business" would do"

Well I'm a wedding photographer and I can tell you that I don't ever have anyone pay me in cash for anything! These days it's all credit cards or cheques. I work from home so don't have a studio in which clients can come to in order to pay.