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.