Our guide to being a VAT registered musician on Encore*.
*VAT is a complex area, and you should always consult an accountant when dealing with VAT and other taxes. This guide was reviewed in July 2023, and may not reflect up-to-date tax information.
What is VAT? 💵
VAT (Value Added Tax) is added to most products and services sold by VAT registered businesses and is currently set at 20%. For an Encore booking, the artist being booked (a solo musician or group) is considered a business.
I’m a pro musician. Do I need to pay VAT? 🎵
Businesses (including those who are self-employed or sole traders) have to register for VAT if their VAT taxable turnover is more than £85,000. They can also choose to register if their turnover is less than £85,000.
Bands are more likely to be VAT registered than soloists, as their VAT taxable turnover is more likely to exceed the £85,000 threshold.
Once you’re registered for VAT, you will have additional responsibilities, a full list of which can be found on the HMRC website.
For VAT registered Encore musicians, you must include VAT in the price of all goods and services at the correct rate.
You must also submit a VAT return to HMRC showing the details of what you’ve charged and paid in VAT over a given period (usually every 3 months).
You should always keep records of how much VAT your business collects and pays, because HMRC can ask to see your VAT evidence at any time.
If you’ve charged more VAT than you’ve paid to other businesses, you must pay the difference to HMRC.
You can register to pay business VAT here.
What are the benefits of being VAT registered? 🙌
Once you’re registered, you can reclaim the VAT you pay on products or services used in your business, including the Encore service fee!
For example, you could claim back the VAT you pay when you buy instruments or audio gear. You could also claim back VAT on petrol to get to your gigs, the cost of the phone you use to call clients, marketing costs and lots of other expenses.
All of a sudden these business outgoings could be 1/6th cheaper.
You’ll need evidence when claiming back VAT, so make sure you keep all your receipts, which should have the VAT number of the supplier on them.
HMRC is a great source of up to date information, so be sure to read their article on reclaiming VAT here.
My group or I don’t yet receive £85k per year from music. Should we stay unregistered? 🤔
It’s completely your call. There are pros and cons to either option.
If you are VAT registered, you must add VAT to whatever you charge your customer.
On the Encore platform, that means if you are VAT registered, your customer quote will be inclusive of VAT. You will later have to pay any VAT your customer pays to you over to HMRC.
It could mean that your pricing might be higher than non-VAT registered acts.
Non-VAT registered acts also have less admin to do - you don’t need to file a VAT return each quarter and keep appropriate VAT receipts.
However, if you don’t register for VAT, you cannot claim back the VAT you pay on costs like petrol to travel to gigs, instruments or cables/gear you buy, getting your instruments serviced and more.
Does this mean if I’m VAT registered I can claim back VAT on Encore’s Service Fee ? 🤝
You absolutely can! 🎉
The Encore Service Fee is 16.67% of the amount your customer pays you. Because Encore is a VAT-registered business, we also have to charge VAT on top of our service fee, which works out at 3.33% of the price the customer pays.
How do I claim back VAT? 🙏
Once you’re VAT registered, you must report how much VAT you paid and charged to customers to HMRC.
HMRC has a great guide on how to fill in your VAT return, but you should consult an accountant before doing this yourself. Alternatively, you can ask an accountant to do your VAT filings for you.
Make sure you keep appropriate records, including VAT receipts for everything you’re buying for your business, as HMRC can ask to see these at any time.
What should I do if a customer asks for a VAT invoice or receipt? 🧾
If you are VAT registered, you'll need to send the customer a VAT invoice that includes details of what you’ve supplied and how much VAT the customer is paying, and follows HMRC requirements.
We’ve made it easy for you to generate a draft VAT invoice for your customers. Once you’ve filled in your VAT details on Encore, just go to your Payment History through your dashboard and choose Customer Invoice next to the relevant gig. Finally, check the invoice is complete and accurate before sending it to your customer.
Remember: You are supplying a service directly to the customer, and should invoice them directly. Encore will not be able to provide a VAT invoice directly to your customer.
If you are not VAT registered, simply tell the customer that they don't pay any VAT when booking you, so the payment isn't eligible for a VAT invoice.
I am / my group are VAT registered. Where do I add my VAT info on Encore? 🔎
When you edit your profile, you’ll see a VAT info tab. Click ‘Yes’ to fill in your VAT details.