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Where Taxpayers and Advisers Meet

Tax on insurance payout

Amberlight007
Posts: 2
Joined: Fri May 25, 2018 3:07 pm

Tax on insurance payout

Postby Amberlight007 » Fri May 25, 2018 3:28 pm

Since 2004 I have slowly been building up a body of artwork not for sale but so that I can exhibit and get my work known. The majority were on the walls of a public building for a number of years but all got destroyed during a flood. I put in an insurance claim of an amount which I think is fair for this significant loss and am waiting to see what happens. I feel the loss of my body of work for all that it represented, including as a tool for exhibiting and I hope to start again and build up another collection. Also, the mediums used do not exist anymore so I cannot replicate new pieces to the same standard. I have a full time job, low pay but I pay tax and national insurance. If I receive a payout from their insurance, how do I show this on my tax form and is it all to be shown as income which will be a big hit for me tax wise. Thank you for any advise you can offer me.

pawncob
Posts: 4137
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Tax on insurance payout

Postby pawncob » Thu May 31, 2018 12:19 pm

If you're self employed as a commercial artist, then the insurance receipt is all income.

If you're not a commercial artist, and not registered with HMRC then it's not a business and there are no tax consequences.
With a pinch of salt take what I say, but don't exceed your RDA

Amberlight007
Posts: 2
Joined: Fri May 25, 2018 3:07 pm

Re: Tax on insurance payout

Postby Amberlight007 » Wed Jun 13, 2018 6:27 pm

Thank you very much for replying and clarifying this for me, I really appreciate it.

bd6759
Posts: 2854
Joined: Sat Feb 01, 2014 3:26 pm

Re: Tax on insurance payout

Postby bd6759 » Wed Jun 13, 2018 11:17 pm

But the clarification might not be correct.

Imagine that you were a boat builder, not an artist. You build 6 boats to demonstrate your skills in the hope that you will one day sell them and obtain orders for some more. They all sink in dreadful storm. The insurance pays you their selling value. That would be a taxable receipt becasue it would compensate you for loss of profits.

In what way does your situation differ?

pawncob
Posts: 4137
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Tax on insurance payout

Postby pawncob » Thu Jun 14, 2018 12:09 pm

It's a hobby, not a business. So far, no sales, no profit.
Would HMRC accept a loss claim for the expenses incurred to date?
With a pinch of salt take what I say, but don't exceed your RDA

bd6759
Posts: 2854
Joined: Sat Feb 01, 2014 3:26 pm

Re: Tax on insurance payout

Postby bd6759 » Fri Jun 15, 2018 9:16 pm

It's a hobby, not a business.
That's a bold statement

pawncob
Posts: 4137
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Tax on insurance payout

Postby pawncob » Sat Jun 16, 2018 7:21 am

It's an opinion :mrgreen:
With a pinch of salt take what I say, but don't exceed your RDA

bd6759
Posts: 2854
Joined: Sat Feb 01, 2014 3:26 pm

Re: Tax on insurance payout

Postby bd6759 » Sat Jun 16, 2018 10:36 am

If it were a hobby. the insurance claim would do more than cover his direct costs - the canvass and paint. His post suggests that his work has a value above those costs, and the insurance will fill that hole in his profits (to paraphrase a well known tax case).


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