The complete guide to being a VAT registered musician on Encore.
What is VAT? 💵
VAT is a tax of 20% which is added on top of the cost of items and services provided by a business or sole trader.
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? 🎵
Any business receiving over £85k per year must register for VAT.
Businesses below this threshold can choose whether or not to register.
This is why bands are more likely to be VAT registered than soloists - group’s higher fees are more likely to reach £85k in one year.
Once you’re registered, you must charge VAT on your fee for every booking, and submit a VAT repayment every tax year.
You can register to pay business VAT here.
What are the benefits of being VAT registered? 🙌
Once you’re registered, you can claim back the VAT you pay on products or services that could be considered a business expense.
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 or travel costs for gigs, the cost of the phone you use to call clients, marketing costs and everything in-between - as long as it can be proved to be a business cost.
All of a sudden these potential outgoings are 1/6th cheaper for you. And even better, if you’ve paid more VAT than you’ve charged, the government may owe you money!
This is why it’s important to keep receipts. You’ll need evidence when claiming back VAT.
Check out the government’s article on claiming back 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 aren’t VAT registered, you’ll be able to quote customers a lower fee as you don’t have to include VAT. That may give you a competitive advantage on other acts.
Non-VAT registered acts also have less admin to do - you don’t need to report business incomings and outgoings to HMRC.
However, if you don’t register for VAT, you aren’t able to claim back VAT you pay on costs like 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 20% Encore Service Fee you pay when you're booked is VAT-inclusive.
As a business cost, it’s perfectly reasonable to claim back the VAT you’ve paid in the Service Fee.
How much of the Encore Service Fee can I claim back? 📊
To work out how much you spent on VAT, just divide the Service Fee by 6. That’s how much you can reclaim.
Service Fee ÷ 6 = Reclaimable VAT.
Hang on. VAT is 20%. So why can’t I claim back 1/5th of the Service Fee? 🤷♂️
As with most costs in the UK, the Service Fee already has 20% added on top.
So, to work out what you can reclaim, you need to calculate 20% of what Encore receives, not 20% of the VAT-inclusive Service Fee.
Sounds confusing? I’m not surprised! However, maths can sometimes be handy.
1/5th of what Encore receives helpfully works out as 1/6th of the total Service Fee!
Let’s say you paid a £120 Service fee.
£20 of it was VAT - you can reclaim this in your tax return.
£100 of it goes to the merchant (Encore).
Why? £100 + 20%VAT is £120 (The total service fee).
Let’s say you paid Encore a £60 Service fee.
That means £10 of it was VAT, which you can reclaim in your tax return.
£50 of it then goes to Encore.
Why? £50+ 20%VAT is £60.
So just remember: Service Fee ÷ 6 = Reclaimable VAT.
How do I claim back VAT? 🙏
You do this by reporting how much VAT you paid during a period of time through the HMRC online portal.
HMRC balances the amount you’ve paid against the VAT you’ve collected, and works out:
- Whether you’re due a refund or a bill
- How much you owe or are owed
The formula for calculating what you owe / are owed is simple:
This is why it’s really important to keep track of your business expenses and incomings all in one place with evidence. (Invoices, receipts, screenshots etc).
When it comes to reporting your VAT, you’ll be so glad that you kept tabs on it all.
What should I do if a customer asks for a VAT invoice or receipt? 🧾
A VAT invoice is a specific type of invoice that’s issued when a sale is subject to sales tax.
If you are VAT registered, you'll need to send the customer a VAT invoice. You can use a free invoice generator tool, like this.
HMRC’s VAT invoice requirements state that a full VAT invoice needs to include:
- A unique invoice number
- Your business name
- Your registered address
- Your VAT number (you can find this on your HMRC account)
- Date it was issue
- A date of supply
- Your customer’s name and address
- A description of the goods or services provided
- The price per item (not including VAT)
- The rate of VAT charged per item
- The quantity of each item
- Any discounts applied to each item
- The total amount due (not including VAT)
- The total amount of VAT due
Encore cannot provide a VAT invoice directly to a customer (because the contract is between the customer and the musician).
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.