Hi,
I am setting up a UK ents Agency and I am looking for some help regarding VAT liability. I have no problem with Commissions but I want to sell complete evening show packages, ie. Singer, Magician, Comedian, Band. The trouble as I see it is that selling acts this way I will have to put the entire Cheque through my books even though only a little of it is actually mine (I cannot really ask the venue to pay each performer seperately and then pay me my commissions.)

This will very quickly push me over the Vat Threshold. I do not want to have to charge vat on my kid shows adding another 17.5% to the price.

I know that if I start the agency as a partnership, Customs sees it as a seperate entity and I can get around it this way. But any one have any other ideas?

Phillip
:genielamp:

Hi

If you are looking to avoid having to charge VAT on your core business (your kids entertainment), the only real way is to keep that business seperate from your new venture.

Your new venture (agency) would need to be set up as a separate business, and of course you wouldn't have to register that second business for VAT either, if you really didn't want to (unless it goes, or is close to going over the £55,000 VAT threshold)

But, have you calculated whether actually merging the two operations, and becoming VAT registered may be worthwhile.

For example - yes, if you don't want to charge VAT on your current prices, then you will have to burden the VAT element in your current kids show prices (so if for example, you currently charge £80 for a show, you will 'lose' £11.90 as VAT - and net about £69) BUT you can begin to claim back against your sales VAT, all the VAT you are charged on buying props, petrol, advertising, Telephone, costumes, etc....

You will have to look back over the last few months, and use a spreadsheet to work out what would have happened if you had
'burdened' the VAT element in your fees, but claimed against is the VAT you were charged in your expenses - you may be suprised.

One other idea is to keep the two ventures together, until the point you are likely to go over the threshold, and THEN split them up into two separate businesses. (but check the legality of this with your accountant)

Finally, remember you can 'de-register' from VAT at any time (as long as your turnover drops below the threshold)

By the way, I believe that you can own as many separate businesses as you want, and you can run each one as a sole trader. (ie no need to be a partnership)

I believe that the rule is, as long as each business is unrelated.

In your case, you might consider them similar, but as far as Customs, and Inland Revenue are concerned they are two separate businesses, offering two completely different services.

Business 1 - you are a self employed entertainer.

Business 2 - you run an agency

I believe as far as business law goes, it doesn't matter that the agency is involved in entertainment, and technically they are unrelated.

If any accountants out there can advise on this, much appreciated.

Cheers

Phillip,
Many agencies require a 15% deposit upon signing the contract (which coincidentaly is your commission).

The contract then usually stipulates that the remainder is to be paid at the end of the show to the performer with their name on the cheque. That is how many agencies do it over here.

You might also appoint one of your performers as "manager" for the rest (hierarchy) and ask them to pay the others from their cheque (although I do not know how that might fly with them).

PSIncerely Yours,
Paul Alberstat

Hi Winston,
Your thoughts are the same as mine.
I already have my adult performances as a seperate partnership business to avoid Vat As it is (otherwise, I would definitely exceed the threshold and my reclaim through purchases would not compensate it).
If the customs will accept that the agency is a completely different entity then I should be OK. I think I will have to ring them.
Phillip

Hi Thoughtreader,
Yes, that's pretty much the same here. But if the cheque was payed to some third party who distributed it. This third party would have to declare it.
Phillip

Phillip - I wouldn't ring them. I would find out some other way of finding out if this is okay.

Even if it is legal, Customs will advise you against it, as ultimately they are losing out by this kind of operation.

My company has been VAT registered for many years, and from experience, I can tell you that I would never, ever, go to them for advice, as it always seems biased in their favour.

Best to ask your accountant, he really should be the one to know this. Or may £50 for a consultation with another
'independent' accountant.

But again, I am convinced that the agency would be seen as a completely separate entity, you as a performer.

I would be interested to know what professional advice you get on this issue.

Cheers

PB!

I found this bit of business very fascinating!

Is VAT, Value Added Tax? Customs, Revenue Agency. Sounds like the equivelant of our spooks at IRS. They always have one hand in our wallets!

Things sure are different in the UK regarding taxes.

Fascinating.

Hi Bascomb,
Yes, over here the Inland Revenue collects Tax. But once your turnover exceeds £55,000 (about $85,000) you have to get involved in charging Vat (Value added tax) which is 17.5%, that simply you collect for the goverment! This is policed by the Customs and Exise.
Phillip

Philip,

I run my own business here in the UK. I asked my accountant about VAT registration, and because I supply mainly knowledge and skill, as opposed to material goods, he advised me against voluntary VAT registration, which I thought would be a good way to get some money back against petrol, clothes, electricity, the mortgage, etc. However, what I stood to gain in monetary terms, was not worth it in terms of time spent doing calculations, worrying about the VAT man and so on. I have very little in the way of travel expense, corporate lunches, etc. The gain would be minimal, at best.

My accountant advised me that if it looked as if I were going to reach the VAt threshold, I should split my business (web design) in two, one firm supplying design, one supplying webspace and domain names.

The other thing about the VAT, is that although you get it back eventually, you need to either charge extra to cover it until you get the rebate (thus putting your prices up), or you need to swallow the cost, do extra work to cover the deficit, and end up with a bigger bill, due to higher turnover, higher bills from the accountant. and a coronary from all the extra stress!!!

It's much simpler (and less stressful!) to start a new business.

Hi,
The advice I have been given, is that it is not always sufficent to simply create a new business or the Vat man will simply decide that you did it to avoid Vat even if the businesses are very different. The only way you can be sure that this will not happen is to have the businesses as seperate entities.
Ie. One sole trader, one Partnership or ltd co.
phillip

Just to add to the confusion for our transatlantic friends who may be interested in our peculiar TAX system here in Britain.

The most difficult thing to understand when VAT registered (which my company is) is that not everything is 'VATable', but learning (or knowing) which is and which isn't is crazy.

For example.

No VAT charged on Posters, but if you print anything on the back of them, then VAT is charged.

No VAT on cakes, but there is VAT on biscuits (cookies) - (in fact it is rumoured that this is the reason that the well known biscuit Jaffa Cakes is called so, ie to avoid VAT)

VAT on adult T-shirts, none on kids sizes

No VAT on Books, but VAT on Videos

VAT on Enveleopes, but not on Stamps

VAT on Car Fuel, But not on train tickets.

and believe me the list goes on

Cheers

NOTE - the cake one may have now changed, as the food categories do alter from time to time - but apparently there was big court case regarding Jaffa Cakes, to decide whether they were biscuits or cakes - I am afraid I do not know the results.

If you have a good enough accountant (and possibly solicitor too) it doesn't matter what the VAT man says. Your people prove whatever for you (to a degree) that's what you pay them for!