Tax in the UK and USA

Registering for UK tax

You may need to contact HMRC, whatever your income, by registering as a self employed sole trader. See
https://kareninglis.wordpress.com/paying-uk-income-tax-on-book-royalties-uk-authors/
When I spoke to HMRC, they indicated that you shouldn't be paying any significant amount of tax on earnings under £5885, but always check with them directly if in any doubt.

My answer came through from HMRC's Stephen Newman - paraphrased

Guidance regarding an author's income can be found on these pages of the  HMRC Business Income Manual, stating that "any profits are taxable under the Miscellaneous Income provisions."
This means that you should declare any income you get from selling your books, whether you are employed, retired or on supplements. Particularly if you are organising your life to regularly spend time on work which has a commercial value. There is further clarification in the Income Tax (Trading and other income) Act 2005

The Income Tax Act 2005 (section 688) (2A) states that "...which provides relief on income from the use of furnished accommodation in an individual's only or main residence: see, in particular, sections 794 and 798)," but there are no real links here; in fact the other act quoted, the Corporation Tax Act 2009, bears no relevance for a self-published author, so I suspect their processes are not yet correctly updated and cross-referenced.
The real crux comes under the Business Income Manual section 85000, where losses are detailed. If it costs you more to write and promote your book than you get in royalties, you can request and fill in a tax return to claim tax relief on your expenditure. You need to keep detailed records of your costs (including lighting and heating and room space at home) and expenditure on computer hardware, paper, printer ink etc. to supply should you be challenged.
If the amounts are low, as with most of us independent authors, your expenses are likely to exceed your income. If you do fill in a tax return, and have a taxed income such as a pension, you may get extra tax relief if you can itemise your costs.

As always though, these are only personal experiences and not recommendations. You should contact HMRC directly if you have any queries whatsoever.

Createspace, Tax and the IRS in the USA

As far as I can tell from the various snippets provided, this is what we need to do. If anyone has any further information or corrections to this page, please contact me and I'll update.

Having received form 1042-S from the omnipresent Internal Revenue Service (IRS) detailing a 30% tax withholding, I challenged Createspace as to why. They advised me to redo the tax interview. At the end of this, you get the option to submit the W8BEN form, which is supposed to get them to tell the IRS not to help themselves to your hard-earned royalties. I did this originally, but I think that CS might have updated their processes which resulted in the charges. This time, the form submitted correctly and I was rewarded with the picture below, without having to send a separate W8BEN.

For your amusement, I am still awaiting the return of my US deductions from 2014. The IRS did say it could take 18 months, but that once they had made the decision to return it, I would get interest on the amount outstanding until it was paid.Back to top of page

    How to find out your Tax deductions

    On Createspace (https://www.createspace.com)

    • Sign in
    • Edit Account Settings
    • Royalty Payment Information

    On Kindle (https://kdp.amazon.com/signin)

    • Sign in
    • Select <your name> account from the top right
    • If the tax information box doesn't read 0% and you are not in the USA then select the Update Tax Information link (see picture and process below)

  • Note that you should still check your email notifications from Amazon and Createspace to confirm that tax is not being deducted.
  • Filling in the Tax Interview

    • Log in to your CreateSpace account and follow these steps
    • Go to Royalty Payment Information
    • Update Tax Information
    • For Tax purpose, are you a US person - No
    • Beneficial owner - Individual
    • Country of Residence - UK
    • Are you an agent... No
    • Put in your address
    • US Person Tests - Leave all boxes blank
    • Tax identification number - I have a foreign (non-U.S.) income tax identification number
    • Country of Residence - UK
    • Tick the box underneath
    • Put in your UK NI number
    • Confirm that it is used for income tax purposes - check the box
    • Ensure section 10 contains 0%: The beneficial owner is claiming the provisions of Article 12 of the treaty identified on line 9 above to claim a 0.0% rate of withholding on (specify type of income): Royalty.
    • Consent to the electronic version of form 1042S and electronic signature
    • Tick all the boxes and type your name in the last one
    • Finally, add your capacity as Individual
    • Print out your completed W8BEN form for your records - according to the form, this is all you need to do.
      See https://kareninglis.wordpress.com/tax/ for further information
    Final result of filling in tax interview - zero percent tax in the US

     

    Createspace have a full guide

    Createspace have a full process here:Back to top of page
    https://www.createspace.com/tax-interview/help?nodeId=201447640&locale=en_US

     

    Reclaiming withheld US tax

    On the back of the 1042S it suggests that reclaiming tax is possible by filling in the form 1040NR. There are many pages of help on this one, but the form can be found at http://www.irs.gov/pub/irs-pdf/f1040nr.pdf with help at http://www.irs.gov/pub/irs-pdf/i1040nr.pdf

    It looks horrendous, but boiling down, the only fields to fill in are:

    • The first section - Name and address
    • Identifying number - local taxation national insurance (NI) number
    • Filing Status - check 2
    • Sections 22, 23 and 36 with your gross earnings from the 1042S form(s)
    • Section 62d, 71, 72 and 73a with the amount of tax withheld
    • Sign and date in the 'Sign Here' section
    • Go to Page 5
    • A, B and L section A - United Kingdom
    • All other boxes, tick 'No' except for the very last one as 'Yes'
    • L section B is Article 12
    • L section C is 0 (zero)
    • L section D is 100% and your gross earnings

    Because the details cannot be submitted electronically, I've posted mine off to:

    Department of the Treasury
    Internal Revenue Service
    Austin,
    TX 73301-0215 U.S.A.


    with a copy of the 1042S forms attached.

    See above for the next stage, where the IRS have replied and sent me another form to fill out.

    Robert Wingfield - June 2017