Running 2 businesses?

GT40Graham · Jun 23, 2010

Hi,

I'm a sole trader and my present business is as an online retailer. I am VAT registered.

I have now decided to take up one of my former hobbies which is playing bass in a band. For this "work" I will be paid and I will also have expenditure in the form of travelling expenses and also costs for rehearsal rooms and various items of equipment.

I don't really know where to go from here as it would be nice to offset some of my expenses and also claim back some VAT on my equipment. Can I in fact consider it as a business?

Any advice gratefully received.

Regards,

Graham.

S-Marketing · Jun 23, 2010

GT40Graham said:
Hi,

I'm a sole trader and my present business is as an online retailer. I am VAT registered.

I have now decided to take up one of my former hobbies which is playing bass in a band. For this "work" I will be paid and I will also have expenditure in the form of travelling expenses and also costs for rehearsal rooms and various items of equipment.

I don't really know where to go from here as it would be nice to offset some of my expenses and also claim back some VAT on my equipment. Can I in fact consider it as a business?

Any advice gratefully received.

Regards,

Graham.

IMO yes, its you who is VAT reg not the business. You will have to charge vat on top of whatever you charge for this extra income though.

GT40Graham · Jun 23, 2010

Hi Stretchy,

Thanks for the quick reply.

I can't see that I'll be charging for anything unless I'm missing the obvious.

Regards,

Graham.

S-Marketing · Jun 23, 2010

GT40Graham said:
Hi Stretchy,

Thanks for the quick reply.

I can't see that I'll be charging for anything unless I'm missing the obvious.

Regards,

Graham.

As you are self employed the money you get paid to play in the band is income so I would assume you should add VAT to it.

Zeno · Jun 23, 2010

In this case, the income from the band would be subject to VAT.

GT40Graham · Jun 23, 2010

Hi Zeno,

I understand that now.

How would all this affect my accounts? Can I just enter in my present business accounts or would I need to start a separate business?

Regards,

Graham.

Zeno · Jun 23, 2010

GT40Graham said:
Hi Zeno,

I understand that now.

How would all this affect my accounts? Can I just enter in my present business accounts or would I need to start a separate business?

Regards,

Graham.

You would need to complete a separate self employment supplement on your tax return. You can show it in your business accounts but it will look at bit weird.

Remember you will only get one Annual Investment Allowance although I doubt this will be an issue.

largada · Jun 23, 2010

just one piece of advise before you register this buisness, is just check with your band mates that everything is being declared,

i'm not saying that there are a lot of dishonest bands out there

however in my experience a lot of band payments are [cough cough]

and will charging vat put off some clients when other bands may then be cheaper to hire??

food for thought!

GT40Graham · Jun 23, 2010

largada said:
just one piece of advise before you register this buisness, is just check with your band mates that everything is being declared,

i'm not saying that there are a lot of dishonest bands out there however in my experience a lot of band payments are [cough cough]

and will charging vat put off some clients when other bands may then be cheaper to hire??

food for thought!

Point taken although there is only me that is VAT registered. The amounts involved are only small, probably about £50 per gig less travelling expenses. I'm just very tempted by the thought of reclaiming the VAT on a £500 amp and should I buy a new bass, that could easily amount to in excess of £1k.

Regards,

Graham.

Tom McClelland · Jun 23, 2010

You would have to give your clients VAT invoices for your playing, or there is no way that your band costs would be acceptable. If there is a bandleader who controls bookings and payments and stuff I suppose you could give them your VAT invoice as perhaps the band itself would be your client, rather than the pub/club/whatever. Basically it would increase the cost to them of using you by 17.5% (20% from January), but you'd be able to recover some of that when buying your instruments.

So if the other band members are not VAT registered (which is very likely) effectively they'd end up paying your VAT for your instruments. That is how VAT works, there is always at the end of the chain a non-vat-registered end user of the product/supply who is paying everyone else's VAT. (assuming that you're playing at a profit, and that the cost of your instruments doesn't exceed the value of your bookings)

GT40Graham · Jun 23, 2010

Tom McClelland said:
You would have to give your clients VAT invoices for your playing, or there is no way that your band costs would be acceptable. If there is a bandleader who controls bookings and payments and stuff I suppose you could give them your VAT invoice as perhaps the band itself would be your client, rather than the pub/club/whatever. Basically it would increase the cost to them of using you by 17.5% (20% from January), but you'd be able to recover some of that when buying your instruments.

So if the other band members are not VAT registered (which is very likely) effectively they'd end up paying your VAT for your instruments. That is how VAT works, there is always at the end of the chain a non-vat-registered end user of the product/supply who is paying everyone else's VAT. (assuming that you're playing at a profit, and that the cost of your instruments doesn't exceed the value of your bookings)

Hi Tom,

Many thanks, this is starting to make sense.

My assumption is that I wouldn't be playing at a profit, not for some time anyway, would this be a problem?

Regards,

Graham.

Tom McClelland · Jun 23, 2010

All the money that you save by reclaiming VAT on your purchases comes from somewhere. If you make no sales at all that money comes from HMRC. The more sales that you make, the more that the money you saved comes from your band colleagues who you've given VAT invoices to rather than HMRC. At break-even point all of the money you saved is coming from your colleagues rather than HMRC and above that additional costs continue to be incurred by your colleagues without you benefiting.

It strikes me that this whole approach is unlikely to endear you with other members of the band. Essentially it acts to transfer money from their pockets into yours.

As others have pointed out playing in a band in pubs/clubs for small sums of money is typically an "accepted" black economy activity that isn't worth HMRC chasing and no-one is declaring any of the income for their personal tax, for example. The moment you start doing stuff like this you're encouraging HMRC to shine a light on what is going on with your band. At the very least you'd have to declare your own income and pay presumably 20% tax on it.

Billmccallum · Jun 23, 2010

I think you need advice from HMRC...

I did some work with a plumber some years ago, he decided he wanted to get into film making and spent £60K making a feature film.

HMRC decided that all the expenses related to the film could not go through his business as he was registered as a plumber and film making was a "hobby".

Best to get advice from the horses mouth.

GT40Graham · Jun 23, 2010

Tom McClelland said:
All the money that you save by reclaiming VAT on your purchases comes from somewhere. If you make no sales at all that money comes from HMRC. The more sales that you make, the more that the money you saved comes from your band colleagues who you've given VAT invoices to rather than HMRC. At break-even point all of the money you saved is coming from your colleagues rather than HMRC and above that additional costs continue to be incurred by your colleagues without you benefiting.

It strikes me that this whole approach is unlikely to endear you with other members of the band. Essentially it acts to transfer money from their pockets into yours.

As others have pointed out playing in a band in pubs/clubs for small sums of money is typically an "accepted" black economy activity that isn't worth HMRC chasing and no-one is declaring any of the income for their personal tax, for example. The moment you start doing stuff like this you're encouraging HMRC to shine a light on what is going on with your band. At the very least you'd have to declare your own income and pay presumably 20% tax on it.

Yes, but surely, the end user is the pub/club and not the other band members?

Anyway there is enough here to make me think that it might not be worth doing.

Regards,

Graham.

Tom McClelland · Jun 23, 2010

GT40Graham said:
Yes, but surely, the end user is the pub/club and not the other band members?

Only if the band is VAT registered and gives the pub/club a VAT invoice.

Otherwise you, a VAT registered individual are charging the other band members for your services, including VAT, and they then charge the pub/club but they can't charge the pub/club VAT unless they're VAT registered.

GT40Graham · Jun 23, 2010

Billmccallum said:
I think you need advice from HMRC...

I did some work with a plumber some years ago, he decided he wanted to get into film making and spent £60K making a feature film.

HMRC decided that all the expenses related to the film could not go through his business as he was registered as a plumber and film making was a "hobby".

Best to get advice from the horses mouth.

I shall approach the horse directly.

Thanks Bill.

Regards,

Graham.

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