Extra deductions from fee by venue (Rip off?)

[Mateybass]

I recently played a gig at a very well known venue with my tribute band and at the end of the night we went to collect the fee from the staff. It had been agreed by phone that we would get 70% of the door take (ticket sales were in advance and on the door) and would have to pay the PRS for the songs we performed.

Having managed to attract a reasonable number of punters for a cold January night, we were quite looking forward to the split. However, when we were presented with the breakdown, things went pear-shaped. Deducted from the ticket sales (£902) was the VAT element of the total ticket sales income (£157.85), then PRS (£32), then a charge for venue expenses (£100) then the remaining money was split 70/30. We ended up with less than 50% of the door money in the end.

Now I don't mind paying PRS since the original artist has enabled us to create a tribute band so fair dos (though I thought the venue had paid a PRS licence fee to cover this), and I can live with paying the venue expenses because we were provided with a meal and a box of beer and water (though we weren't told about charges for these before we consumed them) but what I can't understand is why the venue deducted the VAT on the ticket sales from the gross income before anything else. Effectively, they have charged the punter VAT on the ticket and then charged us for the VAT on the ticket... in my book that's charging VAT twice on the same item.

It's the first time in nearly 30 years that this has ever happened. I'm used to paying VAT on agents commission but that's usually because the agent has provided a service. I have never heard of the VAT on gross ticket sales being charged to the band before, and I certainly didn't expect this from such a well-known venue. I shall be contacting Customs and Excise to clarify the position and also the MU for advice.

Anyone else come across this, for want of a better word, "scam"?

[acidbass]

AFAIK, it's the venue's responsibility to pay PRS fees, and I suspect the VAT part of your post to also be a blatant scam to get more money - although I'm sure someone else will be able to confirm this.

Not gonna name and shame the venue?

[Mateybass]

[quote name='acidbass' post='722300' date='Jan 23 2010, 04:35 PM']Not gonna name and shame the venue? [/quote]

Not yet, not until I can establish whether they've made a genuine mistake or not I can almost guarantee that everyone's heard of it though.

[thepurpleblob]

You've at least been scammed on the PRS fee. The venue needs a license to cover that. They have paid. The VAT thing is a bit more debatable - they have to pay the VAT they have charged on the ticket sales to the government regardless so it's money they don't get.

Anyway.... the bottom line is simple. Get something in writing. If you knew you would get Sales less VAT, less expenses, less PRS fee and then split would you still have taken the gig? If you don't get it in writing then you're going to get done sooner or later.

[chris_b]

You've been ripped off because they said one thing and did another.

[Mateybass]

[quote name='thepurpleblob' post='722310' date='Jan 23 2010, 04:45 PM']You've at least been scammed on the PRS fee. The venue needs a license to cover that. They have paid. The VAT thing is a bit more debatable - they have to pay the VAT they have charged on the ticket sales to the government regardless so it's money they don't get.

Anyway.... the bottom line is simple. Get something in writing. If you knew you would get Sales less VAT, less expenses, less PRS fee and then split would you still have taken the gig? If you don't get it in writing then you're going to get done sooner or later.[/quote]

You're absolutely right about the "get it in writing" bit but I haven't been in the band very long so didn't like to stick my nose into how the band is managed. Having run several bands myself in the past, I always had it written and signed in advance just to save any problems come payment time. We would still have taken the gig because of the venue's prestige but at least we wouldn't have suffered a massive downer after a great gig had we been expecting these extra charges. Anyway, I have diplomatically suggested (without laying blame) that they get it in writing for all future gigs.

Regarding the VAT, if they'd charged us for VAT on the expenses and on their share of the door take (for providing a service) then I could have accepted that but to charge us VAT on the gross takings at the door as the first item on the receipt just seems wrong to me. They can claim their share of VAT charged to them back from C&E, we can't.

[chris_b]

Part of your fight back should be to name and shame so that others don't get ripped off like you did. It's the least you can do!

[thepurpleblob]

[quote name='Mateybass' post='722326' date='Jan 23 2010, 05:07 PM']Regarding the VAT, if they'd charged us for VAT on the expenses and on their share of the door take (for providing a service) then I could have accepted that but to charge us VAT on the gross takings at the door as the first item on the receipt just seems wrong to me. They can claim their share of VAT charged to them back from C&E, we can't.[/quote]

You didn't say that though - you said that they deducted the VAT amount before calculating the cut. That's a substantially different thing from charging you VAT on a service you didn't get (which would probably be fraudulent). They're just fiddling the percentage.

I think you are going to have to take it on the chin. I don't want to come over the smart-arse but if you do a gig without a proper contract (at best) or at least a detailed email (and "less expenses" isn't detailed) then you are asking for it.

As long as this is factual, I can't see anything wrong with naming the venue. You haven't accused them of anything. It will caution others who play there to get a proper agreement.

[BottomEndian]

[quote name='Mateybass' post='722297' date='Jan 23 2010, 04:33 PM']Having managed to attract a reasonable number of punters for a cold January night, we were quite looking forward to the split. However, when we were presented with the breakdown, things went pear-shaped. Deducted from the ticket sales (£902) was the VAT element of the total ticket sales income (£157.85), then PRS (£32), then a charge for venue expenses (£100) then the remaining money was split 70/30. We ended up with less than 50% of the door money in the end.

Now I don't mind paying PRS since the original artist has enabled us to create a tribute band so fair dos (though I thought the venue had paid a PRS licence fee to cover this), and I can live with paying the venue expenses because we were provided with a meal and a box of beer and water (though we weren't told about charges for these before we consumed them) but what I can't understand is why the venue deducted the VAT on the ticket sales from the gross income before anything else. Effectively, they have charged the punter VAT on the ticket and then charged us for the VAT on the ticket... in my book that's charging VAT twice on the same item.[/quote]
If they removed £157.85 VAT from £902 gross takings to get the net figure, then whoever's doing their books should be shot at dawn. To be fair to the venue (unless it was agreed otherwise in advance), there's no problem with them removing the VAT element of the takings before any [b]agreed[/b] further deductions and splitting. After all, the VAT element is never [i]really[/i] part of their income -- it belongs to HMRC, who'll get it in the venue's next VAT return. It'll never go into the "Sales" ledger in their accounts.

But if the gross takings are £902, the VAT element of that should be £134.34. £157.85 is 17.5% of the gross figure. So someone's screwed up the numbers.

As for the PRS, that's what the venue licence is for -- you shouldn't be charged for that, unless there's some weird thing with tribute acts I'm unaware of. The venue expenses are cheeky, but it's the unfortunate nature of verbal agreements.

So I'd say you were partially screwed and also the victims of an arithmetical error.

[thepurpleblob]

[quote name='BottomEndian' post='722348' date='Jan 23 2010, 05:28 PM']But if the gross takings are £902, the VAT element of that should be £134.34. £157.85 is 17.5% of the gross figure. So someone's screwed up the numbers.[/quote]

Well spotted. Doing percentages No. 1 mistake there. You should call and say "we noticed that you made a mistake deducting the VAT"

[JackLondon]

[quote name='BottomEndian' post='722348' date='Jan 23 2010, 05:28 PM']If they removed £157.85 VAT from £902 gross takings to get the net figure, then whoever's doing their books should be shot at dawn. To be fair to the venue (unless it was agreed otherwise in advance), there's no problem with them removing the VAT element of the takings before any [b]agreed[/b] further deductions and splitting. After all, the VAT element is never [i]really[/i] part of their income -- it belongs to HMRC, who'll get it in the venue's next VAT return. It'll never go into the "Sales" ledger in their accounts.

But if the gross takings are £902, the VAT element of that should be £134.34. £157.85 is 17.5% of the gross figure. So someone's screwed up the numbers.

As for the PRS, that's what the venue licence is for -- you shouldn't be charged for that, unless there's some weird thing with tribute acts I'm unaware of. The venue expenses are cheeky, but it's the unfortunate nature of verbal agreements.

So I'd say you were partially screwed and also the victims of an arithmetical error. [/quote]

You do know that the VAT is 17.5%?

[BottomEndian]

[quote name='JackLondon' post='722366' date='Jan 23 2010, 05:46 PM']You do know that the VAT is 17.5%?[/quote]
Of the net figure, yes. Not of the gross £902.

[Cat Burrito]

I was always ripped off by venues in my 20s but these days it hasn't happened for a few years now. I'm no buisnessman but this one doesn't sit right with me & I think there is some good advice on written agreements here.

[Sibob]

I find it so bizarre when bands still fall for the "you have to pay the PRS fee's"
It's disgusting that the venues even try it, let alone get away with it!

Si

[Mateybass]

[quote name='thepurpleblob' post='722361' date='Jan 23 2010, 05:43 PM']Well spotted. Doing percentages No. 1 mistake there. You should call and say "we noticed that you made a mistake deducting the VAT" [/quote]

Fair play, that was my calculation mistake, that ties in with what we actually got... I saw the dodgy "duplicate book" copy (with no name, date, venue details or VAT number or signature) at the venue but since the band manager took that with them, I couldn't remember what the actual VAT figure was so worked it out myself at 4am this morning when I got back after the gig... hence the error. The actual VAT figure was £134.34 which ties in with our final fee of £445 which was split 6 ways.

So at least the venue's maths was correct.

Please don't keep banging on at me about getting it in writing... I know, I know!! I'm the only MU member in the band and know the importance from past experience about contracts, but as I mentioned, I've only been in the band for a few weeks and didn't want to appear pushy by sticking my nose into their management affairs... when I say management, I mean lead singer's partner. This will come as an important lesson to them, one I learnt years ago but their naivety in these matters has impacted on my sole income so I have diplomatically suggested that they use the standard MU contract for future gigs and have sent a copy to the band manager.

[MacDaddy]

[quote name='BottomEndian' post='722348' date='Jan 23 2010, 05:28 PM']After all, the VAT element is never [i]really[/i] part of their income -- it belongs to HMRC, who'll get it in the venue's next VAT return. It'll never go into the "Sales" ledger in their accounts.[/quote]

It may be interesting if someone was to ask HMRC if this money has been declared

[crez5150]

[quote name='MacDaddy' post='722585' date='Jan 23 2010, 08:53 PM']It may be interesting if someone was to ask HMRC if this money has been declared [/quote]

yes but unless you're declaring this yourself it could open a whole can of worms...

[MacDaddy]

[quote name='crez5150' post='722588' date='Jan 23 2010, 08:57 PM']yes but unless you're declaring this yourself it could open a whole can of worms...[/quote]

anonymous?

[Mykesbass]

Getting you to pay PRS is very naughty. They pay an annual fee based on the size of their venue. Every act that plays there will then fill out a PRS form - most will claim all the songs they played are their own but that's another issue. PRS will then work out percentages of the venues licence fee to pay the writers. This will all depend on how many acts perform and how many songs they do so the venue doesn't really know how much your individual performance is worth.

Not sure about the VAT, could be legit, having owned a VAT registered company there are some very complicated rules out there.

[Mateybass]

[quote name='Mykesbass' post='722638' date='Jan 23 2010, 09:52 PM']Getting you to pay PRS is very naughty. They pay an annual fee based on the size of their venue. Every act that plays there will then fill out a PRS form - most will claim all the songs they played are their own but that's another issue. PRS will then work out percentages of the venues licence fee to pay the writers. This will all depend on how many acts perform and how many songs they do so the venue doesn't really know how much your individual performance is worth.

Not sure about the VAT, could be legit, having owned a VAT registered company there are some very complicated rules out there.[/quote]

I never twigged about the PRS charge until I got back and realised that's what the licence fee is for, so I think the MU will be interested in that one.

Regards the VAT element, I realise they have to charge VAT on each ticket and that money is then sent to HMRC. But what they have then done is charge VAT again to us on the ticket sales and stated that on the itemised receipt. The way I see it is that they have to send that money also to HMRC since it is clearly stated as a VAT charge. If that is the case and they legally can't keep any money charged as VAT, what was the point in taking it off us to send straight to the government if the VAT already accounted for on the tickets goes there too? 35% VAT rate?

Edited January 24, 2010 by Mateybass

[jonsmith]

I don't think they have. If the gross take at the door was £902, then £134.34 of that gross take is VAT and needs to go straight to HMRC. Therefore it has to come off the gross take before any further deductions or splits can be made. They've charged the ticket buyers and it's included in the gross take, but until they take it off the gross take, they haven't put it in the pot to pass on to HMRC. If they don't take it off the gross take, where will it come from?

We've agreed to pay PRS before & we simply adjusted the fee accordingly, so it was no big deal really. My understanding is that a percentage of the door take for a live musical performance featuring works written by composers other than the performers is due to PRS, so it's not just coming from the venue's license to play back recorded works. There's an expert or two on here that can probably clarify that. However, the venue or the artist can pay, depending on what they agree together. Either way, if you've agreed in advance to pay it, then that's probably what should happen really.

I'd be upset about the 'venue expenses' though, unless they were in your contract. Might be worth checking the contract.

Edited January 24, 2010 by jonsmith

[BottomEndian]

[quote name='Mateybass' post='722744' date='Jan 24 2010, 12:23 AM']Regards the VAT element, I realise they have to charge VAT on each ticket and that money is then sent to HMRC. But what they have then done is charge VAT again to us on the ticket sales and stated that on the itemised receipt. The way I see it is that they have to send that money also to HMRC since it is clearly stated as a VAT charge. If that is the case and they legally can't keep any money charged as VAT, what was the point in taking it off us to send straight to the government if the VAT already accounted for on the tickets goes there too? 35% VAT rate?[/quote]
If it's stated as a "VAT charge", then that's clumsy language on their part and someone should point that out. But they haven't actually charged VAT twice, if what's happened is as you described in the OP.

The "takings" on the door were £902, right? That's the amount of money the venue took from the punters? Then that's made up of £767.66 net (actual) takings and £134.34 VAT (17.5% of £767.66). If I were in the venue's shoes (and I intended the 70/30 split to be of the net takings after deductions), I would have told the band the takings were £767.66. It makes it much simpler and avoids confusion like this.

£767.66 - £32 (dodgy PRS fee) - £100 (expenses) = £635.66. Your 70% split of that is £444.96, as you said, with the venue taking £190.70 (plus £132 in deductions, of course ...taking it to £322.70).

If the venue had split 70/30 on the £902 gross takings (ignoring any deductions), they still would have had to pay HMRC the £134.34 VAT [i]out of their share[/i]. In that case, you the band would have walked away with £631.40, while the venue took £270.60, but after they'd paid their VAT return they would only have £136.26 left. So in effect the split would have been 82/18, not 70/30 (£631.40 is 82% of £767.66)... which isn't what the band agreed with the venue.

Honestly, the VAT thing looks completely sensible to me, and I've been running VAT-registered retail businesses for a few years now. When we've sold on commission for small (non-VAT-registered) manufacturers, the VAT element of the sale has always been completely disregarded. If I've sold something for "£9.99" to Joe Public, I've actually sold it for £8.50, and the commission charge (or split or whatever) has been based on that figure. If I agree a 50/50 split, then that's £4.25 each. Easy and accurate. If the 50/50 split was on £9.99, the manufacturer would get £5 and I'd get £3.50 after paying the VAT return. Not a 50/50 split at all.

Sorry to blather on, but a lot of people don't understand how VAT works. Us VAT-registered people are simply tax collectors for HMRC, and it's not a good feeling a lot of the time.

[thepurpleblob]

If there had been a one pound booking fee on each ticket would you have expected your cut to be of the amount *including* or *excluding* the booking fee. It's just the same as the VAT thing. The venue has to pay its VAT - there's no getting away from that - all that's happened here is that you have failed to agree if your cut is of the gross or the net figure. Silly you - sorry.

The venue probably are being scumbags but they've taken advantage of you naivety not done anything wrong. I'm sorry to bang on about it, but others beware. That's why bands have managers to worry about all this nonsense.

[Mateybass]

Well, I've had a sleep on it now and time to reflect and I'm guessing that most of my initial annoyance was that, according to our "manager", there was no mention of being charged for food and drink or of the venue recovering their VAT from the band. According to our "manager" the last time this band played there, it was a straight 70/30 split.

Thinking about it and pondering the fact that our "manager" didn't get it in writing, it being merely a verbal agreement, that perhaps the verbals she was hearing were different to those actually being spoken by the venue to her on the phone.... or she didn't ask the pertinent questions. Either way they've learned a valuable elementary lesson, though one which I didn't want to be on the receiving end of again. I have suggested to the "manager" that this shouldn't happen again and that all the current bookings and any future bookings should be backed up by a written or email agreement.

Anyway, thanks for all your comments, I get the VAT thing now and I DO understand getting it in writing (see my earlier postings), but unfortunately the "manager" didn't. I'll just have to take it on the chin and if it happens again I'll look for a less cluelessly managed band or do it myself

[thepurpleblob]

As a matter of fact, I used to be on the other side of this doing band booking way back in the 80s. For almost all the same reasons I always gave the band a written contract and everything was signed. I didn't want to be met down a dark alley by some disgruntled punk band that had got the wrong impression of the deal