Paying Tax

[beerdragon]

Talking to a couple of mates who are in a band last night and they were telling me that a guy who runs a pub that both their band and ours play at has had a visit from the tax man and for some reason he given the tax man contact numbers belonging to all he bands that have played. this apparently is for the year 07. we played there once that year. i am going to get all of the story if i can before i say any more. this could be interesting. does anyone have any experience of the tax man and their band?

[crez5150]

All I'm gonna say is make sure you keep receipts for everything..... I mean everything....

[waynepunkdude]

Being as I make a loss on most gigs could I charge the taxman?

[Mr Fudge]

It also handy to have the National Insurance number of an ex wife or 2 ... :brow:

[crez5150]

[quote name='Mr Fudge' post='539880' date='Jul 13 2009, 11:19 PM']It also handy to have the National Insurance number of an ex wife or 2 ... :brow:[/quote]

Wouldn't getting married be more of a pain in the arse in the first place..... think I'd rather stump up the cash....

[bythesea]

Someone like the landlord who pays money out to others would be able to claim that as a legitimate business expense. However, if requested (and it sounds as though he has) he would be required to prove the expense by giving details of who the money was paid to.

That money would count as your income, but there are a number of things that you would be able to claim against that income to reduce any tax liability.

They won't necessarily come after you (depends sometimes on whether they just have details of a single payment to you or more than that). What they might do is send you a tax return to see if you declare the income.

[i]Speaking as someone who a) used to work for the inland revenue a long time ago, and b ) a musician who earned a bit and got found out in the same way (after I left their employment and also many years ago!).[/i]

Edited July 13, 2009 by bythesea

[OldGit]

[quote name='crez5150' post='539876' date='Jul 13 2009, 11:17 PM']All I'm gonna say is make sure you keep receipts for everything..... I mean everything.... [/quote]

+1
You can offset all your gear and stage clothsad dry cleaning and travel aand some foodand stuff so if you are on pub gig rates you'll be fine.

If you don't keep receipts and records of everything - and I too mean everything - the tax man can assume you got paid for thousands of gigs more than you are declaring and YOU have to prove you didn't ...

[Mr Fudge]

[quote name='crez5150' post='539886' date='Jul 13 2009, 11:23 PM']Wouldn't getting married be more of a pain in the arse in the first place..... think I'd rather stump up the cash....[/quote]


I think you are right. This is what is known as "false economy".

[beerdragon]

There must be thousands of bands playing up and down the country every weekend. the Countries broke, its a wonder the tax man hasn't jumped in before now.

[bumnote]

I tried to get a rebate against my day job some years ago and I tried to claim for a mesa boogie stack. I sent them a set of accounts.

I got a letter back saying they considered it a hobby, and I would not need to submit an annual declaration just monitor it.
Needless to say, that is locked in a safe.

I keep an ongoing record of all my expenses, travel, equipment [you can only write off capital purchases at a percentage each year] gig fees, strings, cleaning, repairs etc. Its surprising how much mileage allowance tots up if you practise regularly!!!!!

I do that cos I arrange our gigs and often get the cheques.

I have seen a number of people who have been done, and often penalised for making a false declaration along the way. On their tax return, or on any benefit claims they may have made.

If you play in the pub, and get a few quid, the taxman [never make the mistake he is stupid] knows that you would be legitamately able to write off some or all of your earnings against tax.

My guitarist declares each year, and makes sure he never shows a profit.

You could even get some advice from the tax people, they dont all bite.

[thepurpleblob]

My suspicion has always been that if there was significant tax revenue to be had in chasing down pub covers bands then the tax offices would be doing it. They know there's no profit in it for most bands. Even the bands charging proper money are probably dripped up paying for their massive PAs.

Having said that, some awkward bugger could spoil your day by getting you to fill out tax returns for the last n years when you have no receipts for anything. At the end of the day, if you are getting paid income and not declaring it it's a risk you take.

EDIT:
Yeh - when I was self employed I found the tax office advice people to be more than helpful. They don't want to drag you through an investigation either.

Edited July 14, 2009 by thepurpleblob

[Musky]

[quote name='waynepunkdude' post='539878' date='Jul 13 2009, 11:19 PM']Being as I make a loss on most gigs could I charge the taxman?[/quote]

I read an article 10 or more years ago saying that you could! Though the article also noted that the taxman would probably only wear that for a couple of years before deciding it was just a hobby rather than a serious business.

Things might have changed now, but if it's still allowed you can also claim for a instruments, rehearsals and a whole bunch of other stuff like your 'home office'.

Edit: I should have read bumnote's post first.

Edited July 14, 2009 by Musky

[thepurpleblob]

[quote name='Musky' post='540145' date='Jul 14 2009, 11:09 AM']I read an article 10 or more years ago saying that you could! Though the article also noted that the taxman would probably only wear that for a couple of years before deciding it was just a hobby rather than a serious business.

Things might have changed now, but if it's still allowed you can also claim for a instruments, rehearsals and a whole bunch of other stuff like your 'home office'. [/quote]

Well... they're going to come round and ask you what you're using to buy food eventually

[High score]

[quote name='beerdragon' post='539870' date='Jul 13 2009, 11:13 PM']Talking to a couple of mates who are in a band last night and they were telling me that a guy who runs a pub that both their band and ours play at has had a visit from the tax man and for some reason he given the tax man contact numbers belonging to all he bands that have played. this apparently is for the year 07. we played there once that year. i am going to get all of the story if i can before i say any more. this could be interesting. does anyone have any experience of the tax man and their band?[/quote]


Bands are a hot topic for the tax man and classed as a bit of a black economy. One the respondents said keep all your receipts - this is essential cos the tax man will go back approx 7 years. They may estimate a bill then have you challenge it. Guilty until proven innocent and ''name giving'' seems to be more common among the larger chain pubs.

It sounds to me like the landlord has been rumbled for something and then spilled his/her guts. It is unlikely the taxman will go through all of the names but more likely pick those that have been identified previously or are recurring.

I wouldn't worry about it to be honest but take a lot of care from now on that you keep a diary of all your venues, how much paid, distance travelled etc. That way you will at least be partially covered.

[Musky]

[quote name='thepurpleblob' post='540147' date='Jul 14 2009, 11:12 AM']Well... they're going to come round and ask you what you're using to buy food eventually [/quote]

Yeah, I think the idea was that you could offset your losses against tax payments from your day job, but it seems they're wise to that one now anyway.

[ironside1966]

Tax avoidance is a criminal offence.
MP get slagged off for fiddling expenses, benefit cheats are slagged off, but tax avoidance is ok so long as it’s to do with music.
It is unfair on Pro musicians who have to pay tax if you have regular income from music.

I am no accountant but I believe spending your money on gear does not mean you don’t pay tax, all that you are allowed is the depreciation in value.
Also consider If you are the one who signs for the money how do you prove that you have split the money with the rest of the with the band, you could be liable for the lot


Waiting for abuse now

[thisnameistaken]

[quote name='OldGit' post='539888' date='Jul 13 2009, 11:25 PM']If you don't keep receipts and records of everything - and I too mean everything - the tax man can assume you got paid for thousands of gigs more than you are declaring and YOU have to prove you didn't ...[/quote]

The inland revenue wouldn't legally be able to demand tax from you based on "assumed" earnings unless there was some evidence of the money coming in - bank deposits, records of spending, testimony of people who've paid you for your services, etc.

They can't just send you a demand for some impossible figure and insist that you prove you don't owe it.

[thepurpleblob]

[quote name='ironside1966' post='540287' date='Jul 14 2009, 01:20 PM']Tax avoidance is a criminal offence.
MP get slagged off for fiddling expenses, benefit cheats are slagged off, but tax avoidance is ok so long as it’s to do with music.
It is unfair on Pro musicians who have to pay tax if you have regular income from music.

I am no accountant but I believe spending your money on gear does not mean you don’t pay tax, all that you are allowed is the depreciation in value.
Also consider If you are the one who signs for the money how do you prove that you have split the money with the rest of the with the band, you could be liable for the lot


Waiting for abuse now[/quote]

None from me - it's true. People who avoid tax mean someone else has to pay more or someone doesn't get that new cancer drug. However, musicians are just in with the heap of 'grey economy' paid in cash folk. I suspect most pay more tax via pissing away their earnings at the bar. Unfortunately, that would not be tax deductible. Having to do tax returns is a major pain in the arse. It's a shame there isn't an easier mechanism for people doing work like this to "be honest".

[Musky]

[quote name='thisnameistaken' post='540290' date='Jul 14 2009, 01:22 PM']The inland revenue wouldn't legally be able to demand tax from you based on "assumed" earnings unless there was some evidence of the money coming in - bank deposits, records of spending, testimony of people who've paid you for your services, etc.

They can't just send you a demand for some impossible figure and insist that you prove you don't owe it.[/quote]

Want to bet?

I found myself with a £20,000 tax bill when I was self employed because somebody at the tax office seemed to think my earnings would be doubling every year. It was absolutely ludicrous. Fortunately that person (who had totally dug their heels in, despite invoices to the contrary) moved on and the person who replaced her settled for a far more realistic £5,500.

[thepurpleblob]

[quote name='Musky' post='540319' date='Jul 14 2009, 01:50 PM']Want to bet?

I found myself with a £20,000 tax bill when I was self employed because somebody at the tax office seemed to think my earnings would be doubling every year. It was absolutely ludicrous. Fortunately that person (who had totally dug their heels in, despite invoices to the contrary) moved on and the person who replaced her settled for a far more realistic £5,500. [/quote]

As far as I know, they work on the basis of 'average' earnings for a given profession. So, if you turn up with no records/proof that's what you're paying. Which can go either way, of course. I think you have to remember that it's their day job to get the money out of you. They've probably got quite good at it Somebody on here must surely work for the IR? They're probably keeping quiet..... taking notes. I don't play for money by the way

[Musky]

[quote name='thepurpleblob' post='540324' date='Jul 14 2009, 01:55 PM']As far as I know, they work on the basis of 'average' earnings for a given profession. So, if you turn up with no records/proof that's what you're paying. Which can go either way, of course. I think you have to remember that it's their day job to get the money out of you. They've probably got quite good at it Somebody on here must surely work for the IR? They're probably keeping quiet..... taking notes. I don't play for money by the way [/quote]

You're right. I seem to remember my accountant saying that her assumption would have been perfectly reasonable for some start up businesses, but I had been working as a despatch rider! He had a pretty low opinion of the people working at the IR anyway, but he was absolutely dumbfounded with this individual's attitude, which was completely inflexible. The person who took over the case settled for just £300 over what my accountant reckoned to be an accurate tax liability, and said that was probably just to go some way to justifying the amount of time wasted on the case.

[Owen]

Regarding putting kit against tax see post 8 in this thread

[url="http://basschat.co.uk/index.php?showtopic=47346&hl="]http://basschat.co.uk/index.php?showtopic=47346&hl=[/url]

[bumnote]

[quote name='thisnameistaken' post='540290' date='Jul 14 2009, 01:22 PM']The inland revenue wouldn't legally be able to demand tax from you based on "assumed" earnings unless there was some evidence of the money coming in - bank deposits, records of spending, testimony of people who've paid you for your services, etc.

They can't just send you a demand for some impossible figure and insist that you prove you don't owe it.[/quote]

Yes they can, they make a reasonable assumption and put the burden of proof on you

A friend used to play the organ on every other saturday in a pub, and he got paid cash. The pub closed down because the landlord had been on the fiddle and when the investigators went in, they found Jack 'according to the books', had been playing and being paid for three nights a week.
After a long battle he ended up paying tax on money he had never received, because the IR was able to prove he played there, and he wasnt able to prove he hadnt played three night a week.

[mrcrow]

[quote name='crez5150' post='539876' date='Jul 13 2009, 11:17 PM']All I'm gonna say is make sure you keep receipts for everything..... I mean everything.... [/quote]

defo!!!

keep records and receipts for everything...and even if you dont have a receipt keep the record in your cash book
i worked self employed for years and got on fine with the tax man..
no cheating and good relationships
had an accountant who was also self employed
never paid tax...just accounts fees
a bargain
!!

[WalMan]

[quote name='Musky' post='540319' date='Jul 14 2009, 01:50 PM']Want to bet?

I found myself with a £20,000 tax bill when I was self employed because somebody at the tax office seemed to think my earnings would be doubling every year. It was absolutely ludicrous. Fortunately that person (who had totally dug their heels in, despite invoices to the contrary) moved on and the person who replaced her settled for a far more realistic £5,500. [/quote]
If you've records to back up claims and submit accounts then there should be no problem.

You are possibly thinking back to days pre Self Assessment, which we have now.

Years ago when I worked for the dark side we used to have to raise assessments each year (now you self assess by submitting your tax return) and I remember going through the process of raising estimates for people who had not submitted returns for a few years. It was supposed to have some basis in reality, but for someone who had not bothered for a couple of years we just doubled the previous years estimate to try to elicit a response - on the basis that they had been happy to just accept the previous years so lets try a biggier number to see if that brings a head above the parapet.

With SA you submit your return and make your assessment, which HMRC may enquire into within 12 months of your submitting the return.

If they send you a return and you ignore it eventually they will issue a determination of the figures (ie an estimate) and that will be the figure until such time as you submit a return to prove otherwise. You have to do that within 5 years or it will now become final, and an old scheme called equitable liability, where the collector would correct figures for a determination that had gone out of time is being withdrawn, so beware.

In theory you can submit a claim for expenses and if they exceed income set the loss againt other income and get a tax refund [b]BUT[/b] to claim a loss you need to be trading with a view to making a profit. If you do not make a profit within a few years then HMRC will say that it is a hobby and only allow you to carry the loss forward, not set it off.

You can claim for rehearsals, strings, batteries, motor costs and anything else required to carry on your business.

Instruments, amps etc (things that have an expected life longer than a couple of years) are capital items against which you can claim a writing down allowance of 20% each year, or more likely at the moment the Annual Investment Allowance which allows you to set the cost of capital items up to £50k each year against income. BUT REMEMBER when you come to sell the amp or bass the proceeds come in as income so a claim for that is only a timing saving until you sell the gear on. And if it happens to be an appreciating asset like a vintage P bass you will pay some tax in the end.

I keep thinking I should add something to the WIKI, but life is just too short sometimes