I’m currently developing a new artsbiz service, and am grateful to be supported in this through Islington Mill‘s WEAVE program (and hurrah for what’s left of our access to the EU Funding which resources it). I’ve been straddling the arts/biz space since around 1995 when I first became a freelancer, have run a Partnership which evolved into an 8year Limited Company (and went through a ‘High Growth Business Development Program’ back in the 2000s when Angel Investors were all the rage for ‘innovative tech’), have been a Board Member for all sorts of companies and groups, and have been advising other artists and arts businesses in UK and Australia ever since.
I frequently find that ‘traditional business’ training and support often miss a lot of nuance specific to arts business, so I’m going to spend some time reflecting on this and sharing some of those thoughts along the way. As a geek I’m also vividly aware that most people (artists or otherwise) are still not aware of, or not confidently exploring, the plethora of digital tools which can make their work and lives vastly easier (I’ll get to the geek side in another post).
I’ll start with a couple of disclaimers. It’s been a Very Long Time since I last ran anything more than a Sole Trader business in the UK, so I am not an expert in UK laws and systems around these things. I may also -gasp- be plain wrong in some of my analysis. Things change over time and (despite what some may tell you) no one knows everything about everything. If I am factually incorrect, please let me know – I’d much rather be corrected where facts are concerned (! …although my opinions and experiences aren’t up for grabs, thanks). The following is my opinion/experience/observation combined with a few web searches for the latest info, and is not offered as legal or professional advice.
I’m also – blatantly – antiCapitalist (and pro ethical taxation, which may come as a surprise), and am highly aware that my deep disdain for our inherent systemic injustice can leave me a little snarky when it comes to ‘traditional business’ as a whole. My empathy is offered in advance if any of this doesn’t fit the norms you’ve been taught to simply accept as ‘the way it is’. My view is that the system isn’t broken: it was designed this way… and as such, we can redesign it to be better for EVERYONE. I mean… imagine if our collective needs were reimagined in a way which better reflects who we really are as humans, with our varying values, needs and circumstances, all trying to coexist on a planet with limited resources.
It could be cool, right?
OK, all that asserted… let’s go.
A few nuances I’ve noticed between traditional and arts biz
1. Registered Company Models.
The majority of arts businesses are Sole Traders, with an increasing number registering as a CIC (Community Interest Company – a more ethical Limited Liability model along Charitable Status lines, only with less paperwork/legal demands than a Charity). Some arts businesses start as Sole Traders or Partnerships and then switch to becoming a Limited Company because of the additional liability protections available (especially those with high equipment costs or those delivering high risk projects). Very few arts businesses register for VAT because the cost/benefit analysis [CBA] between their occasional VAT expenses and the drain of required monthly VAT paperwork demands just simply isn’t worth it (which can subsequently cost them more in the long run, sigh).
Dividends are extra payments that can be drawn on top of earnings, typically paid to Company Directors or Shareholders of Limited Companies – they cannot be drawn as a Sole Trader, or from companies registered under a Charitable Status. Whenever mention of ‘dividends’ is made during traditional business trainings, I find myself snorting in cynical derision (generally out loud… oops). I rarely hear an artist saying they have been able to pay themselves a consistent living wage and still break even on their business expenses. In around 26years of working around all this, I am yet to ever hear of a single artist/arts biz finding themselves in the privileged position of also then drawing a secondary dividend income (which, to add to my cynicism, is taxed at a far lower rate – note the 20% tax on earnings up to £37,500 / 40% tax on earnings between £37,500-150,000, compared to a teensy 7.5% tax on dividends. Again with the sigh).
2. Income and Tax Returns.
A traditional business aims to make its income from a regular flow of product/service sales with maybe the odd top-up grant along the way. Whereas a typical arts business survives (if it’s lucky) through a reliance on far more erratic and increasingly competitive (and consistently reduced) arts grants, commissions, a ‘side hustle’ service (generally supporting other artists, so priced accordingly at lower levels), with maybe some product sales (aka ‘artworks’) along the way.
Traditional business startups are designed to create the maximum profits possible as quickly as possible, using efficient and streamlined repetitive processes, and are typically designed around the client/customer’s needs – delivering a small range of products/services at a fixed cost to all.
By contrast, the majority of arts businesses are what we used to call ‘lifestyle businesses’ – typically designed around the artist’s needs rather than those of the client/customer. The artist’s aim is to ensure as much security and sustainability as possible within a precarious environment, so that we can ‘follow our hearts/communicate our truths’ rather than only offering an off-the-shelf, one-size-fits-all product/service to everyone.
Most artists I have worked with rarely turn a significant profit and are relieved when they simply break even. When Tax Return time rolls around we invariably panic, gazing at our shoeboxes or carrier bags of not-yet-logged receipts, wishing we’d better filed the ones which came in via email, and subsequently missing deadlines and ending up too scared of all the threats of fines to know what to do about it all. Cue: overload.
Traditional business training reminds us that we can always have a conversation with HMRC about it. If, or when, we do, HMRC simply do not understand non-traditional business and generally aren’t helpful at all – “computer says no” is a cliché for good reason. It can be an enormous relief to discover that these threats of fines (or even a fine payment if HMRC has billed you automatically) are wiped clean/fully refunded if your earned income sits under the minimum threshold (which this year in England is £12,570).
Likewise, HMRC can also not be clear about the fact that National Insurance contributions are not liable when you earn under a certain threshold (this year in England: 12% on earnings over £9,500; 40% on earnings over £50,000). On a personal level, the pressure to ‘contribute to my State Pension’ (which is largely what NI is for) seems an unfair additional poverty tax when over my lifetime I have watched it consistently reduce in amount (currently £179.60pw), whilst the age to claim it is ever-increasing (this currently sits at 67years old, although it’s under review, again). I have long suspected that there won’t even be a State Pension by the time I’m old enough to claim one (although that’s not actually so far away, gulp). I would personally much prefer a Universal Basic Income be made available to everyone regardless of paid employment, so that we can finally acknowledge things like the unpaid labour which humanity relies on – particularly parenting and care work, of which the physical, emotional, and economic cost is typically borne by women.
I’m not sure why we don’t talk openly about all this. Perhaps it’s due to the inherent societal shame of ‘not being seen as economically successful’ which Capitalism relies upon. Our reality in the arts sector is that it’s incredibly difficult to be ‘economically successful’, or even just about survive. Sometimes even being honestly vulnerable about our reality can reduce stress levels considerably, and make Tax Return time a far less harmful and disruptive experience all round.
3. Working from home.
Whilst I’m aware some of the other Islington Mill participants are incredibly fortunate to have access to their excellent studios/workspaces, in my experience the vast majority of artists do not have access to, or sufficient incomes for, a studio or office space. The vast majority rely entirely on working from home.
As we are starting to hear more widely since COVID, HMRC does not recognise or support this practice very well at all (something that artists, parents/carers and the disabled have been banging on about for decades). Traditional business trainings will automatically assume ‘studio/office space’ are your most consistent business expense, but the reality of our far more common ‘work from home allowance’ needs are far less clear. According to the Govt’s current advice, if you are employed and have been made to work from home because of COVID, you can claim an additional allowance of £6pw. This is curiously reduced to zero if you choose to work from home (whilst presumably still meeting the same work demands).
As a Sole Trader (which the majority of artists are), the details get seriously murky. For a start, you MUST have earned enough in the previous year to even claim those expenses (much like those extremely selective emergency COVID grants which freelancers have been complaining about), and they must be clearly separate from living costs. Essentially, in order to easily meet the demands of these ‘allowances’, you would need two mobile phones, two broadband connections, two utilities services, and a separate invoice from your landlord for renting ‘working space’ and ‘living space’ – and never the twain shall meet. Hmm. Again with it costing freelancers far more to work in ways which both better suits them, and in reality is the only way they really can given the typically exorbitant rate of office hire. And that’s not even mentioning the extremely blurry lines artists tend to have between ‘work’ and ‘life’. All in all, it’s a bit of a mess, and one which completely ignores and dismisses the needs of an entire sector – a sector which is the first to be cut during austerity, and which we have seen during COVID is the most in-demand outside of our physical essential services.
I really encourage exploring options for advocacy here. Given the mass-shift to working from home which COVID has brought us, we have an amazing opportunity to drive changes in policy to better support those working from home by choice or circumstance, not just because of a pandemic. This can include artists, parents/carers, and disabled folx, as well as those who can’t afford to live in the cities where most of the jobs are… or used to be!
Where the shift to digital has been challenging for some, it has been an astonishing breath of fresh air for so many of us who have been asking for these concessions and adaptations for a very long time! It would be wonderful to both step up as allies to support working from home and UBI movements, and help drive policy changes so we can ALL gain the financial supports we need to not just survive, but THRIVE.
…
OK, there’s a lot more to say, but I think that’s enough for now. I will get way more geeky in another post since I’ve offered to hold an informal chat with WEAVE participants around the ways technology can carry much of the burden when managing finances. I’ll share that advice after that happens.
Thanks for reading, and as always hit me up if I’ve missed anything, am wrong about any facts presented, if you have any follow up questions, or if you have something constructive to add to any of this 🙂