VAT
Lesson time: (2min 28sec)
Why it can pay to register for VAT even when you're below the threshold - so you can claim back the VAT on your upfront costs.
Course preview
This lesson is part of the course Music Business 101 for Artists
Watch a preview of the full course below.
Lesson transcript:
VAT Registration Insights for Emerging Artists
Let's talk about the young guy that came to see me very recently.
After 15 months, he's not at a size where he should be.
VAT Registration Recommendation
While he statutorily has to register for VAT, we recommended that he should indeed become VAT registered.
Why VAT Registration?
The reason is simple:
- Many of the upfront costs are going to be VAT-able.
- For example, if we're going to charge him £500 for our time, well, there's another £100 on top of that for VAT. This suddenly makes the cost £600.
If he's not VAT registered, he can't claim back that VAT we have to charge. However, if he is VAT registered, he will get that £100 back.
Additional Costs
Considering his situation:
- He has lawyer fees.
- He's going to have to pay commission to his manager, who is also VAT registered.
- He's bought quite a lot of equipment, which is also VAT-able.
We informed him, "You might lose £2,300 on VAT."
He hasn't got sufficient money to absorb that loss.
Financial Overview
Also, the deal was about £50,000.
What we would then do is:
- Get him registered for VAT.
- Charge the VAT on that £50,000.
This would then give us an extra £10,000.
From that, we can deduct the costs incurred from that £10,000, and the rest gets paid back to the government.
Conclusion
Ultimately, it comes down to depends.
In this instance, the costs of registering for VAT and administering it more than justified the benefits.
It doesn't matter what size you are; it depends again on:
- How serious you are about your career
- How quickly you want to build your infrastructure
The sooner you establish your infrastructure and get the foundations right, the less you have to think about later on.
You can then concentrate on the creativity that an artist excels at, just as lawyers will concentrate on their legal requirements.
That's the important thing.
About the instructor
Imogen Heap is a Grammy-winning English singer, songwriter, producer and technologist whose influence runs through two decades of pop, electronic and film music — and through much of the technology modern artists now take for granted. Born in London in 1977 and classically trained on piano, cello and clarinet, she released her debut album 'iMegaphone' in 1998 before forming the duo Frou Frou with producer Guy Sigsworth, whose song 'Let Go' reached a global audience through the film Garden State. Her self-written, self-produced album 'Speak for Yourself' (2005) delivered 'Hide and Seek', the a cappella landmark that later powered Jason Derulo's chart-topping 'Whatcha Say' and Ariana Grande's 'Goodnight n Go', and continues to find new generations of listeners. 'Ellipse' (2009) won the Grammy Award for Best Engineered Album, Non-Classical — recorded and engineered in her own home studio — and she went on to co-write and produce 'Clean' on Taylor Swift's Album of the Year-winning '1989'. She also composed the score for the stage play 'Harry Potter and the Cursed Child'. A relentless innovator, Heap developed the MI.MU gestural gloves — recognised with three honorary doctorates — and founded Mycelia and The Creative Passport, initiatives building a fairer data ecosystem for artists. In 2024 she returned with 'What Have You Done to Me?', created with her AI vocal alter ego Mogen, while a viral resurgence of 'Headlock' brought her music to millions of new fans. read more