Band as a Business (Tax implications)

Shoog

Wywth wrote: »

Or mine, which I thought addressed both questions already.

Do you think the OP is doing an 'Ed Milliband' and just asking questions without taking into account the responses already received? :huh:

I'm sorry, I did read it (quickly) but won't have time to respond fully until later hence

Shoog wrote: »

Thanks again for all the responses, will reply properly later

and

Shoog wrote: »

I'll read over the other points in-depth later.

antrobus, re:hobby - I'm expecting royalty payments and performance cheques within the next month, so is it still a "hobby", in your opinion. This not about some fanciful notion of "making it big". You can still earn money at various different levels in the music business.

Again, some useful answers here, will respond properly later. Thanks

CKhalvashi

Wywth wrote: »

(I must say £1500 expenses to earn £100 may raise some eyebrows as to the test of reasonableness if it continues on this basis. £100 should be the earnings from 1 or possibly 2 nights at the most. If it's costing you more in travel to get to the venue than you earn in gigging, then give up. Equipment would be assets of the business and not an expense.)

We're a minimum of £300 a night (6 of us), although we've got some experience behind our belts, as I also own the label we're signed to, as a main source of income (which isn't just us).

Speak to an entertainment accountant (we use a friend of mine who's an ATT, but there are several out there) to get the full picture on the tax implications.

CK

antrobus

Shoog wrote: »

...antrobus, re:hobby - I'm expecting royalty payments and performance cheques within the next month, so is it still a "hobby", in your opinion. This not about some fanciful notion of "making it big". You can still earn money at various different levels in the music business...

You're the one that told us that:

Shoog wrote: »

...
Initially (possibly forever) the band is effectively a loss-making business..

and that:

Shoog wrote: »

...
Yearly income is likely to be tiny - £100-£200 maybe, but the expenditure (rehearsal, equipment, travel, etc) could be around £1000-£1500.

So are you now telling us that you are expecting royalty payments and performance cheques within the next month that are in addition to this yearly income estimate?

longtimelurkersam

Aside from the hobby bit as that is for you to decide whether you can argue it is a hobby or a business should HRMC come knocking, there are some inaccuracies in here.

You CAN offset losses from self-employment against your PAYE. You complete a tax return, a PAYE schedule and a s/e schedule and effectively add them together. ie £50k PAYE + (10k S/E loss) = £40k taxable income.

As you've paid PAYE in full on £50k you would there be due a refund. Simple as that. I know as I've done this for several concurrent years and yes I have been investigated by the HRMC as why my s/e business does not return a profit. They are not related, PAYE is office work and self-employed if furniture design and manufacture.

antrobus

longtimelurkersam wrote: »

Aside from the hobby bit as that is for you to decide whether you can argue it is a hobby or a business should HRMC come knocking, there are some inaccuracies in here.

You CAN offset losses from self-employment against your PAYE. You complete a tax return, a PAYE schedule and a s/e schedule and effectively add them together. ie £50k PAYE + (10k S/E loss) = £40k taxable income.

As you've paid PAYE in full on £50k you would there be due a refund. Simple as that. I know as I've done this for several concurrent years and yes I have been investigated by the HRMC as why my s/e business does not return a profit. They are not related, PAYE is office work and self-employed if furniture design and manufacture.

No, I think you misunderstand. It is accepted that you can offset losses from self-employment against income from employment. The question is whether or not the OP is in business or whether they're simply pursuing a hobby.

The fact that you've been investigated by the HMRC for running a loss making business just goes to show that HMRC do indeed look into this sort thing. On the basis of the information given by the OP (as in "Yearly income is likely to be tiny - £100-£200 maybe") and their admission that it "is just a hobby right now", HMRC would likely conclude that it is indeed a hobby and deny loss relief.

That is, of course, just an opinion, but that's what the OP is asking for. I could also point out that since you're talking about loss relief on £1500 of expenditure split four ways it probably ain't worth the hassle anyway.

longtimelurkersam

antrobus wrote: »

No, I think you misunderstand. It is accepted that you can offset losses from self-employment against income from employment. The question is whether or not the OP is in business or whether they're simply pursuing a hobby.

The fact that you've been investigated by the HMRC for running a loss making business just goes to show that HMRC do indeed look into this sort thing. On the basis of the information given by the OP (as in "Yearly income is likely to be tiny - £100-£200 maybe") and their admission that it "is just a hobby right now", HMRC would likely conclude that it is indeed a hobby and deny loss relief.

That is, of course, just an opinion, but that's what the OP is asking for. I could also point out that since you're talking about loss relief on £1500 of expenditure split four ways it probably ain't worth the hassle anyway.

Mistral states quite early in this thread post:
If you make a loss you are not liable to pay any tax. Simple as that. You cannot pay less tax on your PAYE earnings because of this loss. If your PAYE is related to the music industry, you could perhaps try to go self employed and then you might be able to lump the two businesses together. But I would see an accountant before even thinking of it.

This suggests the business have to be linked or he has to be self employed in both. I do completely agree about the hobby part and as you say yes they do look at small outfits and challenge them. I expect a further similar poke into my affairs very soon but that is okay as I have nothing to hide.