Question for acts that use an agency...

DannyP

Hopefully, someone will be able to clarify something that has been niggling us for a while.

We generally take our own bookings for gigs, but occasionally get some work from an agency that takes 15%.

So say we get a gig that pays £850. We get £722.50 (85%) and they get £127.50 (15%), right?

WRONG!

According to them, they get 15% plus VAT which they calculate to be £153, leaving us £697.

It seems to me that we are paying their VAT bill for them, which seems crazy. Can that be right?

If this is one of those industry standard pitfalls to screw over musicians (like 'breakages' etc.) aand I am to naive to know about it then fair enough I suppose, but does anyone else have experience of these terms?

Danny1969

They are VAT registered, which means it's their fee plus VAT. Perfectly normal .... when you buy strings you pay the fee for the strings plus VAT etc

BenSirAmos

If you were registered for VAT, it wouldn't bother you that someone charged you VAT. 

If you want, you can think of it as paying their VAT bill - but that is what you do with nearly all your purchases of goods and services every day. You might think it a rip-off but it is not exclusive to the music industry. That's the way VAT works. They charge you for a service and they have to charge VAT on top of it. It is not their fault that you are not VAT registered. If you want to avoid VAT, you could try selling children's clothing and footwear instead of music.

mike_l

^^^this.

At work, when speaking to a retail customer we always include VAT in the quoted price, speaking to a trade customer it's always excluding VAT.

IIRC there's very little which doesn't have VAT put on it. Books are one of the few things I can think of.

DannyP

But we're not buying the booking off agent, the client is buying a performance from the agent. And the agent has an agreement with us to take 15% of the fee paid. Surely it's then up to the agent to make sure VAT is paid on the 15% they've taken?

maltingsaudio

DannyP said:

But we're not buying the booking off agent, the client is buying a performance from the agent. And the agent has an agreement with us to take 15% of the fee paid. Surely it's then up to the agent to make sure VAT is paid on the 15% they've taken?

It would be had you negociated that beforehand. With no disrespect to you danny  its business and you must approach it as such, having all the terms agreed by both parties before you enter into a contract. This is one of the biggest hurdles which prevents musicians from making a living because we do it for the love,  and do not, in most cases, consider making music as a business , 

Cirrus

If the client is buying your performance from the booking agent then the booking agent is surely adding VAT to that price, that transaction. Doesn't seem right to also charge you VAT on a portion of that total price when they take their cut. You could just as reasonably argue that you can charge them 15% on their cut, because they are buying the right to represent you and make money off of your effort.

But, if you know the deal you can chose whether to work with them or not, I assume it's not clandestine?

DannyP

I do accept all these points, I'm just playing devil's advocate because it feels a bit unfair.

I suppose my real question is: Is this arrangement industry standard?

ESBlonde

As stated already, VAT is Value Added Tax and relates to all goods and services with few exceptions. Professional bands are VAT registered and charge the venue/club/agent/corporation a fee plus VAT which the customer pays and if VAT registered they reclaim the VAT. The fact that you are semi pro and not VAT registered does not allow for any exception.
In your case just make sure you have a VAT invoice/receipt with the agents VAT registration number clearly printed on it. I know of at least one agent that charged VAT but was not registered at the time! They received a visit from the grey suits and it cost them a pretty penny.

BenSirAmos

If the venue is VAT registered then perhaps the booking agent could charge the venue £850 + VAT = 1020 

Then you invoice the Booking Agent for £722.50

As long as they paid you, everyone (including the Revenue) would be happy. But I wouldn't trust any booking agent - and if you worked regularly for that booking agent, there might be implications (like you might be re-classified as an employees and the agent would have to deduct Tax and NI). You need to talk to an accountant - but that would cost you more than the £25.50 you've avoided.

EricTheWeary

Assuming the agency is VAT registered and it isn't a low level scam.
Is it a large agency with many acts or a bloke called Terry who organises the turns for two local pubs ?

Danny1969

Size of agency is irreverent, one man in this dining room turning over more than 81K needs to be VAT registered. 

EricTheWeary

Danny1969;239831" said:

Size of agency is irreverent, one man in this dining room turning over more than 81K needs to be VAT registered. 

well yes, but lots of people trying to be ' agents' who must be nowhere near to being VAT registered.

DannyP

They are VAT registered. We are VAT registered. Just wondered what the industry standard deal is. No worries, I'll email the MU.

ElectroDan

This is standard among all agencies that are big enough to be VAT registered. It normally states 15% +VAT on the contract. Your not buying the gig, but paying the agent for their services in arranging the gig.

If you are VAT registered too, surely it isn't affecting you at all is it?

DannyP

Do you mean that we can claim back VAT paid to the agency?

firepaulmusic

Tell the agent the fee you expect NET and they can work the total fee out by adding their 15%+VAT.

Danny1969

DannyP said:

Do you mean that we can claim back VAT paid to the agency?

You pay the tax man the vat you charged  minus the vat you paid ...... so to you the VAT is irelevant ....  other than making your band appear pricier than a non VAT registered band to a non VAT registered customer

ChrisMusic

DannyP said:

Do you mean that we can claim back VAT paid to the agency?

Yes you can, and should, claim back VAT on any disbursements related to the running of the business.

An accountant can pay for himself by judiciously applying tax law in your favour, as against doing things yourself and missing reclaims.

No I am not an accountant, and always get advice first.  Ask your accountant or HMC&E have helplines, and offices where you can ask for the appropriate way to handle things.  Note not all VAT inspectors know VAT law, and trying to get them to commit to putting anything in writing is harder than a hard thing.  It is a minefield out there...

DannyP

righto, many thanks!