At Clearways Accountants we were approached by a skilful amateur photographer who wanted to take the next step and make it his profession. He already had an excellent portfolio of pictures and had spent a lot of time in gathering the best images together. Adriaan had photography books available for sale through Amazon; he had exhibited locally and his pictures were available in local restaurants and gastro pubs. He had already started to trade when we met.
At Clearways Accountants we recommended Orchard Marketing Associates to help Adriaan with the marketing side of his business development and the first project was the new website and choosing the perfect images to promote his business in the best way.
What could Clearways Accountants do for Adriaan?
The first step was to determine the actual date Adriaan started to trade. We analysed the steps he had taken and made a judgement over when he crossed the line to professional photographer.
You may be wondering what is the difference that makes the difference?
Sometimes it is just an accumulation of facts, sometimes it is an attitude of mind, it’s the point at which you think to yourself, “I’m going to make money out of this, now how will I maximise my income?”
The second step was to determine the value of Adriaan’s portfolio. Costs had been incurred in producing the images and the revenue generated by the website and books would be taxable income. Clearways Accountants undertook to value the portfolio of pictures based on the lower of the cost of acquiring the pictures (for example trips to photographic sites) and the expected income the pictures should produce.
The value of the portfolio was treated as a business asset transferred on the first day of trading.
In addition we valued the equipment that was transferred to the business.
Now Adriaan has a photography business with a portfolio of pictures and all the equipment he needs to produce professional images.
A side effect of the asset and photo transfer was a loss in his first year of trading; under tax law he was able to set this against his other earnings (from 6 April 2013 this set off is limited to £50,000).
Adriaan’s photographs and books can be purchased through his website and while you are browsing the sumptuous pictures you can sign up for workshops to improve your own photography skills!
If you are on the verge of starting a new business as self-employed (sole trader) and you need some advice on when your trade started and what assets you can transfer to the business then please contact Clearways Accountants on 01737 244298.