Paying tax in a band

[BottomE]

I declare most of my band earnings and then offset all costs against this. Food, clothing, phone bills, transport, expenses like strings, setups and of course equipment and finally mileage. I declare it using self-assessment forms.

It's pretty easy - i have peace of mind - GAS actually reduces my tax bill!

If i am earning i have no problem paying tax.

[Twigman]

If you collect all your receipts from the rehearsal studio, the money you spend on your basses/guitars/saxaphones/, all the money you spend on your music software oh and the equipment you need for your home demo studio then unless you are making reasonable returns from gigs I would imagine most folk make a loss.
If all of this is declared on your tax return and offset against your music income then you will get tax relief on your losses and a mice cheque from HMRC.

[hamfist]

LIke a number of you I declare everything, and claim back for everything also . The self-assessment form is pretty straightforward for most people.
Once you've claimed back for travel, gear, consumables etc, etc, most of us hobbyists will be making very little profit. And if I do, I am happy to pay the appropriate tax on it. I only keep receipts for larger items. Otherwise, it just all goes into a little "band notebook". The taxman is actually very uninterested in checking up on details for someone who is claiming fairly minimal earnings.

[BILL POSTERS]

[quote name='WalMan' timestamp='1337934215' post='1667516']
Although the chances are that HMRC will (or should) if not immediately then within the first few years of such claims knock you set off claims back on the grounds that you are not "trading with a view to a profit".
[/quote]

If they do that, and officially declare it a hobby. Then does that mean that what you earn is exempt ?
cos if not then surely what you spend would still be deductable.

[Twigman]

[quote name='WalMan' timestamp='1337934215' post='1667516']
Although the chances are that HMRC will (or should) if not immediately then within the first few years of such claims knock you set off claims back on the grounds that you are not "trading with a view to a profit".
[/quote]
In 30 years they've not complained.
Not made a profit once in any of those years.

[WalMan]

[quote name='BRANCINI' timestamp='1337948843' post='1667867']
If they do that, and officially declare it a hobby. Then does that mean that what you earn is exempt ?
cos if not then surely what you spend would still be deductable.
[/quote]Not exempt, just that it cannot be set against other income in the year only carried forwards. There are rules in the Taxes Acts that govern what you can do with losses.

They are basically saying you are not carrying on a business, but a hobby, and therefore cannot offset the losses against other income (getting a tax refund in the process). If circumstances change you would need to tell them, and it would be advisable to maintain notes of all the ins & outs in the meantime, particularly if you think the circumstances might change and you start making a profit in the future and want to take advantage of the built up losses.

[WalMan]

[quote name='Twigman' timestamp='1337950030' post='1667899']
In 30 years they've not complained.
Not made a profit once in any of those years.
[/quote]You are lucky then. They should have stopped it after 5 years if not sooner.

Edited May 25, 2012 by WalMan

[Twigman]

[quote name='WalMan' timestamp='1337950707' post='1667915']
You are lucky then. They should have stopped it after 5 years if not sooner.
[/quote]
i think if you can show them recording/publishing contracts etc then they let you carry on.


I did get a letter once a long time ago and sent them copies of these.

Edited May 25, 2012 by Twigman

[WalMan]

And just to reiterate to all those who say "I claim everything including all my gear" that is fine, BUT when you sell a bass, amp, pedal, etc that you have claimed a deduction for thet the proceeds are taxable income, same as your gig money.

The rules that effectively allow you to deduct the cost of gear in the year against income (so long as you did not spend more than £100k up to 5 April 12, and £25k since) are fairly recent, and do not drop receipts on sale of such items out of tax. Just FYI in case it comes as a nasty shock later on.

Consider that vast collection of vintage basses you have built up and claimed deductions for. When you give up (will we ever of course), you have to value them and bring in that value as income. Might mean a BIG tax bill on retirement from the music business.

[WalMan]

[quote name='Twigman' timestamp='1337951052' post='1667920']
i think if you can show them recording/publishing contracts etc then they let you carry on.


I did get a letter once a long time ago and sent them copies of these.
[/quote]As long as you can provide good evidence that you expect to make a profit, and some time soon, then you should be OK, but I would have expected them to be asking for updated proof of intention every few years to check whether anything had changed. Still, like I say sounds like you are lucky and have managed to do so.

[BILL POSTERS]

[quote name='WalMan' timestamp='1337950669' post='1667914']
Not exempt, just that it cannot be set against other income in the year only carried forwards. There are rules in the Taxes Acts that govern what you can do with losses.

They are basically saying you are not carrying on a business, but a hobby, and therefore cannot offset the losses against other income (getting a tax refund in the process). If circumstances change you would need to tell them, and it would be advisable to maintain notes of all the ins & outs in the meantime, particularly if you think the circumstances might change and you start making a profit in the future and want to take advantage of the built up losses.
[/quote]

Sorry to harp on, but do you mean that I should pay tax on the odd fifty quid or so I get from gigs, but cannot claim for my expenses because its just a hobby ?

[TimR]

You only pay tax on profit.

If you spend as much on consumables as you get paid for gigs you don't make a profit.

However, if you buy an amp or bass. This is capital expenditure. You can only claim it as an expenditure after you sell it. If you sell it for less then the difference is an expense. If you sell it for more then the difference is income.

[mushers]

i think most accountants would say (quietly so noone could hear) not to bother for what would be maybe a couple of hundred a year profit
cash is hard to trace and a squigle on a scrap of paper serves no real purpose, we used to be able to employ casual labour years ago as long as the cash was signed for.
personaly since running my one man business for years and paying my own tax and all that, i like to keep everything above board so if your employed already you will just need to fill in second income bits of self assesment.
by the time you have counted up what you have spent you may be at a loss and pay no tax or perhaps a rebate.
could always ask the taxman himself, although he is lots of people and when i have spoken to hmrc i have had very different answers to the same question from different people
it can be a minefield

[Twigman]

[quote name='mushers' timestamp='1337961312' post='1668131']
when i have spoken to hmrc i have had very different answers to the same question from different people
it can be a minefield
[/quote]
I am an accountant by day.
This is very normal for HMRC.
Even their website carries exactly contradictory information on certain topics - sometimes only 2 or 3 paragraphs apart on the same web page .
It is my belief that all advice is deliberately ambiguous so that all their bases are covered and they leave things open so that they can interpret 'law' whatever way they see fit (in whatever way will generate them the most revenue).
Tax law is NEVER black and white, only all shades of grey.

[BILL POSTERS]

Only my opinion, but based on experience of being Self Employed for 35 years. Its not worth bothering to declare income from a few pub and club gigs, which, at least in my case, not much loss, and not much cash. But keep a record in case you run into problems, otherwise their estimates of your earnings could be just about any figure they snatch out of thin air..

Getting investigated is a pain in the arris, I know, been there with the Inland Revenue and the Cusoms and Excise seperately, and its not something I'd like to do again. It was for silly reasons, and I had done nothing wrong, they blamed it on 'shoddy book keeping' Luckilly I had insurance against being investigated, otherwise the accountants bill would have been astronomical, and way way more than the tax bill.

Without wishing to offend forum members who have given some sound advice on this thread, theres truth in this well known old picture, It really is only the accountants and lawyers who come out on top

.
[attachment=108738:pic_prints1_lg.jpg]

[WalMan]

[quote name='BRANCINI' timestamp='1337954705' post='1668001']
Sorry to harp on, but do you mean that I should pay tax on the odd fifty quid or so I get from gigs, but cannot claim for my expenses because its just a hobby ?
[/quote]No. I mean there probably - in fact almost certainly - is no profit and most likely a loss.

Potentially you could set that loss off, but the tax rules say that you can only set the loss against other income and reduce your total liability (possibly getting a refund in the process if you are employed) if you go out to your pub gigs with the expectation of making an overall profit at some point. With the odd £50 here & there you might find it difficult to stack up arguments to support such a claim. So as you say above it's not worth the hassle to fully declare just make sure you keep the records and have something to back up an enquiry later.

What TimR say re profit & consumables exceeding expenditure is what I am trying to get at, and not explaining well. Similarly the point about gear costs is relevant. You could claim up front but it'll come back to bite when you sell.

As a rule of thumb compare income with expenses on consumables (strings, mileage, batteries, insurance etc) and initially ignore gear. If there's a net loss (likely with pub gigs) you're OK.

And as Twigman says, beware relying on advice from HMRC helplines. Generally you will be talking to low level call centre drones with fairly basic training. Tax legislation and associated textbooks cover a large wall at the office. Very few things in tax are black or white, just shades & & so often the answer to a tax question is "it depends"

As you have found, an enquiry by HMRC is a major PITA.

If you have the records it shouldn't be an issue.

If you have to complete tax returns already then a brief note in the additional info section that you earn a little income as a musician but that expenses exceed income each year so that it is considered a hobby and you are not making any further return of this [i]may[/i] help to stop HMRC coming back years down the line and reopening old returns that ought to be done & dusted under normal SA rules long since. This would be on the grounds that you put them on notice that there was this source/hobby income, and they should have opened an enquiry within the normal 12 month window. It's by no means guaranteed, BUT in arguments with HMRC it would be a plus for you.

Penalty rules have got a lot worse in the last year so anything you can do to stave off later attacks will be a bonus

[paul torch]

Thing is though, you need to register as self employed or they'll fine you when you try to submit a tax return.

[bassace]

If you've got a day job, don't bother with self employed stuff but if you must, you can use the box 7.1 to declare any other income. In a gigs sense this is actually profit (money received, less all the stuff that's been mentioned in the previous posts). So the probability is that you won't have made any profit. So ignore everything but still keep your records handy and do end-of-year accounts for your eyes only.

[jonsebass]

So, one thing ive learnt is to keep a note and receipt for everything.

Now - do i just do this for the earnings I receive, or totally for the band;

IE - Gig at X pub = band gets paid £200.
Out of that £200, we all get £40 (£200/5)

Do i just record MY expenses, and leave it to the rest of the band to do their own?

[bassace]

[quote name='jonsebass' timestamp='1337971401' post='1668293']
So, one thing ive learnt is to keep a note and receipt for everything.

Now - do i just do this for the earnings I receive, or totally for the band;

IE - Gig at X pub = band gets paid £200.
Out of that £200, we all get £40 (£200/5)

Do i just record MY expenses, and leave it to the rest of the band to do their own?
[/quote]

Yes, unless you're the leader.

[jonsebass]

Its a covers band - there are no leaders really. We book gigs together, and split all the dough equally - i provide insurance and publicity

[WalMan]

[quote name='jonsebass' timestamp='1337971401' post='1668293']
So, one thing ive learnt is to keep a note and receipt for everything.

Now - do i just do this for the earnings I receive, or totally for the band;

IE - Gig at X pub = band gets paid £200.
Out of that £200, we all get £40 (£200/5)

Do i just record MY expenses, and leave it to the rest of the band to do their own?
[/quote]
[quote name='jonsebass' timestamp='1337976259' post='1668384']
Its a covers band - there are no leaders really. We book gigs together, and split all the dough equally - i provide insurance and publicity
[/quote]
...and here's where the "it depends" comes.

Yes probably but then again your band is [i][u]strictly[/u][/i] a partnership and technically ought to register itself and do returns of the band profit split between all of you. building in individual claims for personal expenses, BUT that is a complete & utter nightmare!!! If you're in two or three bands and do some deps, that gets technically even worse.

For the most part keeping your own records of everything you do should probably suffice, for goodness sake for a pub covers band HMRC making a huge deal of the square root of b'all would be ridiculous and you would hope that a sensible/pragmatic view would be taken, BUT get an awkward 50d who wants to take it to the nth degree and who knows. Hopefully he would have a sensible boss somewhere up the line who would tell him to get a grip and look at the bigger picture.

Now I know that we are generally not talking big bucks, and I seem to be finding difficulties, but that's tax for you

[Gust0o]

I had this once, but then I moved to Bermuda and it went away.

[Gust0o]

[quote name='WalMan' timestamp='1337986224' post='1668492']

Now I know that we are generally not talking big bucks, and I seem to be finding difficulties, but that's tax for you
[/quote]

It's quite... Taxing?

[WalMan]

[quote name='Gust0o' timestamp='1337992585' post='1668542']
It's quite... Taxing?
[/quote]Ain't [u][i][b]that[/b][/i][/u] the truth. That Moira Stewart does talk a load of tosh!!