Averaging profits for creators of literary or artistic works

A special relief is available for creators of literary or artistic works under which they can claim to add together their profits for 2 years and be taxable on the average of those profits if certain conditions are met. This helps to even out fluctuating tax charges for creative persons who may pay little tax one year but perhaps higher rates of Income Tax the following year. The averaging process may help to reduce overall liabilities.

You can claim averaging if your profits come from disposing of works or from royalties you get for allowing people to reproduce your works. So, for example, you can claim if you are:

  • an author whose income comes from the sale of your written work – even if a small part of your income comes from personal appearances
  • a computer software writer whose income comes from royalties for reproducing the code you write, which is protected by copyright

You cannot claim averaging if your profits come from the services you provide. So, for example, you cannot claim if you’re:

  • an architect whose income comes mainly from your services – even if some of your income comes from selling material protected by copyright
  • a computer programmer whose income comes from the service of writing scripts or programs, not the actual works
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