BIM73051 - Averaging: creators of literary or artistic works: introduction

Following consultation about the reform of the taxation of intellectual property in 1999 and 2000, the backwards and forwards spreading rules for authors, sculptors, etc (see BIM50730 and BIM50735) were repealed by FA01/S71 for income arising after 5 April 2001.

They were replaced by a new relief based on farmers' averaging ( BIM73101 onwards). The main features of the new rules are explained in Help sheet IR234 to the self-employment pages of the SA tax return. If you are making or examining a claim please read the Help sheet first. You can see a copy in the SA area of the HMRC website or ask the orderline (telephone 08459 000 404) to send you one.

The new rules apply to the same types of profession as the old spreading rules but they are simpler and more people will be able to claim. By contrast with the previous spreading rules:

• There is no requirement that the claimant must have taken more than 12 months to create the work. This will enable a greater number of people to claim.
• Profits are averaged rather than individual items of income from particular works being spread. This will substantially simplify computations.
• People who create works in partnership will be able to claim.

The legislation is in ICTA88/S95A and ICTA88/SCH4A. The new rules are written in the style used by the Tax Law Rewrite Project (TLRP) in their rewrite of the rules on farmers’ averaging (ICTA88/S96). The rules on farmers' averaging were exposed for comment in Chapter 3.13 of the Tax Law Rewrite Exposure Draft No 10, published in May 2000. The draft clauses were on pages 95 to 98 of Volume 2 and the commentary on pages 100 to 101 of Volume 1. You can see a copy in the Publications area of the HMRC website. The Help sheet and the legislation will enable you to deal with most aspects of the new rules. Some particular aspects are explained at BIM73055.

These rules and the ones for farmers’ averaging are merged in ITTOIA. If you need help beyond that in the legislation and Help sheet IR234 please refer to the appropriate section of the guidance on farmers’ averaging. There is a list at BIM73060.