Making sense of musicians’ VAT deductions

Author: Mark Wingate

Categories: Tax Planning
Tags: Musicians, VAT

Mark Wingate, Partner - Private Client Tax Services, Smith & Williamson on making sense of musicians’ VAT deductions

One of the areas where it’s so easy to go wrong is with VAT.

 Classical musicians, like other entertainers are subject to a regime that’s called the Reverse Charge.  So when the classical musician performs in another country, they on the face of it would have an obligation to file VAT returns in that country.  Now, the Reverse Charge in fact imposes the obligation to file on the person who’s paying them.

But there are tricky things such as complete exemptions for some musicians in some countries, or reduced rates of VAT.  One so often sees that going wrong.

And of course if it goes wrong it never seems to go in the favour of the performer.  So that can save an awful lot of money.

And so often one finds that people don’t appreciate that the contract that the musician signs is saying, “You will get this amount of money and from that we’re going to make deductions, either the withholding tax or VAT.”

 And that comes as a real surprise.  It can mean the musician gets a lot less than they were anticipating.  So looking at the contracts in the first place, but thereafter damage limitation with how much tax and how much VAT is deducted is how I can make a real difference.

Simplifying international tax for musicians

Author: Mark Wingate

Categories: Tax Planning
Tags: Withholding Tax Regime

Mark Wingate, Partner - Private Client Tax Services, Smith & Williamson on Simplifying international tax for musicians

Classical musicians are entertainers.  And for tax purposes, entertainers like sports people are probably subject to the most vigorous international rules there are.  If someone is based in the UK and only performs in the UK their affairs are relatively simple, they will just submit a UK tax return.

But that’s not the world with classical musicians, their career is very international, a singer, a conductor, an individual performer

And so will be moving around the world.  And they will be remunerated in different countries around the world.  And that imposes upon them potentially an obligation to file tax returns in all those countries.

Now, there is a regime in place called the Withholding Tax Regime which necessitates the person paying them, so the Opera House, the Concert Hall, to deduct some tax at source.

That in a way discharges their tax liability in the particular country they’ve performed.  But suffering that tax in so many countries around the world can mean they overpay tax drastically.  In the UK we have quite an enlightened tax regime whereby a musician can submit a claim for all their expenses and indeed their personal allowance that they’re entitled to upfront, and so suffer less tax deduction.  But not all countries apply that.

So what I enjoy doing, what I think benefits those musicians most is the analysis of the international tax position and trying to prevent excessive recovery at source.

Then they don’t have to submit tax returns because it’s done on the right basis from the outset.  It helps their cash flow and cuts down on compliance.

Sorting taxes for classical musicians

Author: Mark Wingate

Categories: Tax Planning
Tags: Classical musicians

Mark Wingate, Partner - Private Client Tax Services, Smith & Williamson on sorting taxes for classical musicians

I enjoy working with classical musicians.  I love classical music myself.

 I understand where they have come from, the rigorous training regime they’ve been through, their day-to-day difficulties in finding work, in getting sufficient remuneration from that work.

And for them the tax consequences are an element which they’d rather not think about, it’s the last thing they want to concentrate on.

They’re much more concerned about getting their engagements and performing well, getting good reviews etc.  So what I enjoy doing is getting that side of things, the accounting, the tax side straight for them.

They’re grateful when it’s sorted, but it’s a problem they’d rather not face until they really have to.