screenwriters and V.A.T

Bergstrom

I'm a screenwriter and I've heard of the writer's exemption etc.. ( I still have to sell a script though!) but now I've just heard that I have to pay VAT!! Is this true and is there ANY way around it??

I am thinking of setting up a film Production company and I guess the rights would be transferred from writer to company. But what if I rights were maybe written by me AS the company "in-house" writer? Is that even possible? Maybe someone with some tax knowledge has some way of dealing with it. The accountant that mentioned it said screenwriting is a service and as long as its over €25,00 I'm screwed. I took the below section from the revenue site. Maybe there's a technicality I can get around?? Help!!

Thanks in advance,

Berg

What is a service?

4.1 For VAT purposes a service is any commercial activity other than a supply of goods. Typical services include the services of caterers, mechanics, plumbers, accountants, solicitors, consultants etc. and the hiring or leasing of goods. The supply of digitised goods delivered online is regarded as the supply of a service for VAT purposes as is the physical supply of customised software. Services also include refraining from doing something and the granting or surrendering of a right. Contract work, that is the handing over by a contractor to a customer of movable goods made or assembled by him or her from goods entrusted to him or her by the customer, is also regarded as a service.

Cultural, artistic, sporting, scientific, educational or entertainment services

4.7 The place where these services are supplied for VAT purposes is the place where they are physically performed. For example, fees received by an entertainer in respect of a concert given in Ireland are liable to Irish VAT. Similarly, an Irish based entertainer performing in the UK is outside the scope of Irish VAT.

However, it should be noted that where a person not established in the State supplies a service of a cultural, artistic or entertainment nature to a person in the State for business purposes, e.g. a promoter, the recipient of the service is required to register and account for VAT on the service on the reverse charge basis. When the recipient in the State is a body which has received funding from the Arts Council in the 3 years prior to the passing of the Finance Act 2002, Revenue may on request defer the obligation on the recipient to account for the tax to a time not later than 1 March 2003. In these circumstances the non-established performer remains liable for the VAT. This does not apply to the recipients in the State of sporting, scientific or educational services.

Where the owner of a premises allows a promoter not established in the State to supply services of a cultural, artistic or entertainment nature on those premises s/he must, not later than fourteen days before the event or performance is scheduled to begin, notify the local inspector of taxes of the name and address of the promoter and details of the performance. Where these details are not furnished to the local inspector, the premises provider may be made jointly and severally liable with the promoter for VAT due. A VAT Information Leaflet No. 3/02 is available.

“Fourth Schedule” (or “received”) services

4.8 A number of services, all of which are listed in the Fourth Schedule to the VAT Act, 1972 (as amended), are deemed to be supplied in the place where the customer is located, provided that they are supplied for business purposes within the EU, or for any purpose outside the EU. Supplies of these services to private individuals within the EU are taxable under the general rule (see paragraph 4.4).

The services affected are:-

(a) Transfers and assignments of copyrights, patents, licences, trade marks and similar rights;

(b) hiring out of movable goods other than means of transport;

(c) advertising services;

(d) services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, data processing and provision of information (but excluding services connected with immovable goods);

(e) telecommunications services;

(f) acceptance of any obligation to refrain from pursuing or exercising in whole or in part, any business activity or any such rights as are referred to in paragraph (a);

(g) banking, financial and insurance services (including re-insurance, but not including the provision of safe deposit facilities);

(h) the provision of staff;

(i) the services of agents who act in the name and for the account of a principal when procuring for him or her any services specified above.

Dades

Hi Bergstrom,

I'm also an "undiscovered" screenwriter, and curiously enough worked as a tax consultant for over 3 years. I actually completed a number of "artist exemption" submissions for various writers, pop acts etc. It's a unique exemption, and one worth taking advantage of.

Regarding VAT, I'm not sure where the issue lies. I see no reason why you would make yourself under contract with your own production company. As a 'non-contract' writer any earnings in respect of a sold script should be exempt under artists exemption. (Make sure you make the application within the same tax year you receive payment). You only pay VAT when you are purchasing something - as as you are selling something that isn't a problem as far as I can see.

Unless your production company is actually going to produce the feature, I don't see the point to it. If you become contracted by the a company to write, you lose your artists exemption. You get a fee, which is subject to self-employed tax, and the rights to the script are kept by the company as an asset which may again be taxable again on sale.

BTW I think the last part of the legislation you have bolded refers to the actual service of transferring patents and copyrights.

It's been about 6 years since I practised, but my advice is if you see a cheque for a script - lodge it - and think of the tax consequences when it clears!

** ps Do not take legal advice from boards.ie **

Bergstrom

Are there any technicalities around which I could escape payment of vat and that the payment would be considered JUST a salary and then I can apply for artists exemption for tax.

Berg

latenia

Posted by the Atheist:

I'm also an "undiscovered" screenwriter, and curiously enough worked as a tax consultant for over 3 years.

I also worked in tax for a few years (albeit for the Revenue ) and am now trying to finish up a couple of screenplays. Must be something about the line of work. Maybe we could collaborate on a script about crime-fighting tax consultants or something

To answer your question Bergstrom, I don't think VAT applies here. Accountants do make mistakes, especially if they are not tax specialists (there is a difference), even more so when dealing with something relatively obscure like this. Double check with him to be sure.

The good news for you if you do have to charge the production company VAT when selling them your work is that it may actually work out in your favour financially.

Let's say for example they want to buy your screenplay for €100,000. You register for VAT with the Revenue and add 21% to original price, billing them for a total of €121,000. You will then forward the 21,000 to the Revenue in your VAT return. The production company will also be registered for VAT and they can then reclaim this amount aginst their own VAT charges. So, in effect, it will cost them nothing extra.

How this works in your favour is that now you are registered for VAT and can reclaim it from any purchases you make which could be considered necessary to your line of work. This could be DVDs, a computer, even travel etc.

I'll keep an eye on this thread if you have any more questions.

Dades

Bergstrom wrote:

Are there any technicalities around which I could escape payment of vat and that the payment would be considered JUST a salary and then I can apply for artists exemption for tax.

As latenia said, YOU won't be paying VAT. Whoever buys the script may have to. You cannot get AE on a salary - that would be subject to PAYE. Is there some reason why you want your own production company to own the script?

latenia wrote:

Maybe we could collaborate on a script about crime-fighting tax consultants or something

Hey, Tom Cruise did it in The Firm, so why not?!