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Where Taxpayers and Advisers Meet

Marketing a Musician

MusicMan316
Posts:1
Joined:Mon Jan 25, 2021 4:26 pm
Marketing a Musician

Postby MusicMan316 » Mon Jan 25, 2021 4:39 pm

Hi I own a limited company that generates a small profit of around 20k pa operating as a communications consultancy. So would ordinarily expect to pay 19% of that to HMRC as corporation tax.

My daughter is a promising unsigned musician who's had major label and national press attention - basically to turn that into a chance of a decent offer, she will need to invest in marketing campaigns to 'prove' her market, build social media presence etc...

I'm aware that anything my company spend on Marketing it's products is essentially deductible from company profits and therefore corporation tax...so my question is, what's to stop my spending that 20k extra a year marketing my daughters music in return for an agreement for a share in any label deal she may sign in the future?

Thanks

Mike.

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: Marketing a Musician

Postby Lambs » Mon Jan 25, 2021 6:22 pm

M,

You need to be careful with this issue. Advertising and sponsorship relating to a director's passion project / personal or private interests will generally not be allowable, as they are not incurred wholly and exclusively in the furtherance of the company's trade (e.g., Interfish)

HOWEVER, if you can demonstrate that there is a clear commercial benefit to the company by virtue of a commercial return on the outlay - even if it's not connected to your company's core business - then you will have a stronger case.

In particular, if you can model your approach to whatever is the "industry-standard" (assuming there is such a thing) so that you can say it is as close to an arm's length arrangement as possible, then your company will (presumably) be incurring expenditure on a commercial basis with a realistic view to making a profit on the new activity. But note that, from how I read your query, these are not expenses of your company's existing activity but an altogether separate / proposed activity - not "wrong" per se, but there would generally need to be a separation of the figures in terms of accounting and reporting to HMRC.

You should discuss with your adviser, as to how best to proceed.

With regards,

Lambs

wamstax
Posts:1955
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Marketing a Musician

Postby wamstax » Mon Jan 25, 2021 6:26 pm

Looks a bit dodgy and not wholly and exclusively for the purposes of the company’s trade.

Unlikely that you would be able to show that any such expense was incurred on the sole purpose basis and smacks of duality of purpose and predominantly because of your personal connection and desire to help your daughter.

Of course if you’ve done it before with a completely unconnected third party this might colour your arguments if it was successful and reaped profits for your company

Alternatively it might be argued that the expenses were capital (and not allowable revenue ) expenses in nature to bring into being an asset or advantage of an enduring asset ( your intended agreement for a new source of income. High risk approach in my view for the trivial tax hit at 19%.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites


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