It's been in the news for a few days now; so much so that even David Cameron has piped up to criticise the former Take That star for his 'aggressive tax avoidance'.
What people perhaps don't think of when considering these tax avoidance schemes is what the knock-on effect will be. Danny Alexander, of the LibDem Treasury said “People who don’t pay the taxes that they should undermine the economy, damage our public services and place an extra, unfair burden on hard-working families and companies who play by the rules.” Also, we think Barlow gives musicians a bad name. We know from our experience of being accountants for musicians that most of you like to be ahead with your taxes to avoid complications in the future.
We also know how much money musicians put into their livelihoods. Buying instruments and amps, flyers and posters, studio space and van hire or maintenance. Below are some guidelines about what sorts of things are tax deductable for musicians.
Business or Hobby?
Do you play music for pleasure or to make a living? One can quickly turn into the other, and once you declare yourself a business, you can probably deduct the cost of your equipment and other expenses and fees on your tax return.
Although you can deduct expenses from your business, you have to make sure to learn what you can and cannot claim, ensure that you report all your earnings from any music and evidence everything. Unlike many other trades, musicians are often paid in cash, so it's important to produce invoices that document your earnings.
Solid Business Advice
If you are declaring yourself as a self employed musician, make sure you are operating like a business. This includes
- Keeping good books and accurate records.
- Having business cards.
- Registering with HMRC
- Joining organisations as a musician
- Copyrighting your own material
What can you deduct?
Inevitably, you will spend money to operate your business, and so long as you can prove how those listed help your business to function, you are able to deduct:
- Consumable supplies (guitar strings & picks, drum skins)
- Music business books, record company directories, venue directories
- Stage clothes
- Subscriptions to relevant magazines
- Sheet music and "How-To" books and manuals
- Promotional: CD/tape duplication (for demos), photos, bios
- Office supplies: paper, envelopes, photocopies, stamps
- Fees related to maintaining your website and e-mail access for your music-related activities, telephone calls and postage
- Rent for storing your equipment and for your practice space
- Overnight accommodation if it's for gigs
- Membership in professional organisations, associations & unions
- Professional fees (accountant, promoter etc.)
- Copyright and registration fees
- Lessons & development
- Travel expenses
Like other creative industries, if you use a space within your home for storage and practise, you may be able to claim some tax back for this. However, it needs to be an identifiable part of your home.