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Where Taxpayers and Advisers Meet

Whether to charge VAT on performance fees

insch
Posts:8
Joined:Mon Jan 31, 2011 11:02 am
Whether to charge VAT on performance fees

Postby insch » Mon May 20, 2019 6:51 pm

I am a composer and band-leader. I did some performances recently where I worked with 6 other musicians who I had booked to play in my band for the events. At the very most I will break even on this short tour, after paying my band member's fees. I don't think there will be any money to pay myself. I may actually make a loss. Since I was the contact for the bookings, all the payments from the venues are coming through me. I am VAT registered. Do I need to build VAT into my invoices? I can't add it, since on at least two of the gigs I am getting a door-split and that amount already includes VAT paid on the tickets. One gig is a fee and I may be able to add VAT on that.

Since I am making no money on this but just receiving payments which I will pass on as fees to my band members, do I need to pay 20% of the fees or door-splits from venues to HMRC? Obviously if I do make any money and can pay myself something I will pay VAT on that. But right now paying VAT on these payments may well put me in the red for the short tour.

Any advice on this gratefully received.

Thank you :)

insch
Posts:8
Joined:Mon Jan 31, 2011 11:02 am

Re: Whether to charge VAT on performance fees

Postby insch » Thu May 23, 2019 10:04 am

No-one got any ideas on this?

Thanks.

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: Whether to charge VAT on performance fees

Postby Trevor S » Thu May 23, 2019 6:38 pm

The lack of responses so far may be due to the complexity, and the fact that a lot is dependent upon the exact contractual relationships between the various parties. I’ll set out my thoughts in case they help, and also detail the assumptions that they are based on. If the contractual arrangements are not as I’ve assumed them to be, the VAT position may well be very different. Forums such as this are no substitute for paid professional advice in more complex issues, although I can understand why you would want to avoid the cost if possible, given the potential loss making nature of this tour.

Firstly, a couple of points to make. VAT is a tax on the supply of goods and services by businesses, not on profit. So the fact that the tour may not make any profit for you is unlikely to affect the VAT liability of any of the transactions. Also it is quite common that multiple steps in the same overall supply chain will be subject to VAT – so it would be wrong to assume that charging VAT on ticket sales removes the need to charge it on other supplies in the chain.

My assumptions are that:

- You are not acting as the agent of the other band members in securing them the gigs. The venue owners are contracting solely with you to provide a band. You are then contracting with the other individual band members to supply their services to you.

- The other band members are not VAT registered, and your contractual relationship with them would not be considered employment (i.e. you have no responsibility to run a payroll and deduct income tax/national insurance from the amounts that you are paying them).

- There are no supplies of goods or services made by you to the other band members.

- Each venue owner is the promoter of the event that is held on their premises. This means that your supply to the venue owner is that of the services of your band, and the amount the venue owner pays to you (irrespective of how it is calculated) is payment for that supply. The most likely alternative to this is that you are the promoter of the overall tour – if so you get into a much more complex web of bartered supplies, including premises hire, ticketing, and so on – and a more detailed VAT analysis would be required.

- The venue owners are VAT registered, and are not eligible to the cultural VAT exemption set out in HMRC's notice 701/47 (available on the gov.uk website).

- The venue owners are not making any supply to you (other of course than allowing you access to the premises in which you will perform).

As previously stated, if any of these assumptions are incorrect, there could be a significant impact on the VAT implications. Add a post with details of any errors in the assumptions, and I’ll revise my opinion if possible.

On the basis that my assumptions are correct:

- The supply by the venue owners to the public will be subject to VAT. They will include VAT in their ticket prices, and pay that VAT over to HMRC.

- Your charge to the venue owners will be subject to VAT. It doesn’t matter how your charge is calculated – whether it is a fixed fee or a percentage of ticket sales. Your contracts with the venue owners should show whether the amount/percentage specified that you can charge is exclusive or inclusive of the VAT that you will need to charge. Obviously this will have an impact on how much you get to keep after you’ve passed the VAT that you’ve changed the venue owners on to HMRC.

- The venue owners should be able to recover from HMRC the VAT that you’ve charged them, as long as you’ve given them a proper VAT invoice/receipt, and they aren’t generating any VAT exempt income as a result of your band’s performance.

- If you are incurring VATable expenditure in connection with the tour, you can reclaim it from HMRC in the usual way – I assume that you’re familiar with the rules for this as you’re already VAT registered.

Hope this is of some help. But as earlier, my opinions are very much based on the assumptions specified, and any variation from this (however minor it may seem) could significantly impact on the VAT treatment.

HinaFelix
Posts:5
Joined:Wed Jul 08, 2020 1:51 pm

Re: Whether to charge VAT on performance fees

Postby HinaFelix » Mon Aug 24, 2020 11:37 am

Professional venue finders do discuss these topics by themselves with venue owners. My recommendation is to apply to a professional service like independent venue finder who will solve all questions. https://www.jigsawconferences.co.uk/


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