Secret Echoes

I thought I’d write about this subject as it may be the one time that my career as an accountant can actually have a small bit of relevance to the music industry.

Over the past few years, H M Revenue & Customs (HMRC) has started a major crackdown on individuals or groups of people who are making money and not declaring it for tax purposes.  Their main targets are people who are making money out of hobbies and one of these hobbies is through bands and solo artists performing gigs and getting paid.

There is a belief amongst many bands that they don’t have to declare their income until they are signed to a record label and are making big money.  Based on HMRC guidelines, any person receiving payment for a service or make use of their skills should declare this under self-assessment.  Now, I’ll be honest, this does seem a little excessive if you’re only making the odd £10 here and there for the odd gig.  But by not keeping a record of this, it could lead to future problems.  Now I’m not saying that everyone should start panicking that they’re going to be investigated by HMRC for tax avoidance and register themselves as self-employed musicians.  But what you should do is keep a record of all income from gigs you perform.  It’s also useful to keep a record of the date and the venue.

HMRC are especially keeping an eye on pubs and clubs which put on live music shows.  These venues have now been asked to start keeping a record of the names and addresses of all the people who they pay throughout the financial year for performing music.  This information will be handed to HMRC if they ever request it.

This may seem a little unfair, especially if you are only performing for the love of the music and not for the money.  But there are a few positives to HMRC wanting people to declare all other income they make outside of their employment.

If you have to declare all your income, you can offset any expenses relating to your band against this.  This can include expenses such as new guitar strings, drum sticks and advertising costs.  You can also claim a proportion of rehearsal costs if you pay for a rehearsal space.

If you have made a profit from your earnings after deductions, you would be taxed at the same rate as you would be through your employment income.

However, if you have made a loss, you may be able to offset this loss against your employment earnings.  This could lead to you receiving a tax rebate.  This is all subject to you correctly declaring you expenditure and not being dishonest to try and get a bit of tax back as this would get you into serious trouble as you would be breaking the law.

My advice to any band is to go out and gig, enjoy making a bit of money from playing and if you begin to start making some serious money, then contact a local accountant to discuss what is the best route to take.  Just make sure you keep a record of your income and your expenses in case you are ever asked to produce them.  In all honesty, it’s unlikely for a band in their first few years to be making a big profit and by keeping decent records, it’ll prove this.

In this blog I’ve only really mentioned a few basics about when your band becomes a business and have tried to steer clear of any really technical accountancy mumbo jumbo, but if you do have any concerns or want to look into this in more detail, you can always contact a firm of accountants or even have a look on the HMRC website (www.hmrc.gov.uk).

Stu (Secret Echoes)