Benjamin Franklin famously said that there were only two certainties in life, death and taxes, what a cheery bloke he must have been. Nevertheless, I seem to be spending quite a lot of my time these days talking about the various forms of taxation that impact on musicians.
First some good news, last year the Musicians' Union enjoyed a significant victory in persuading HMRC to reclassify self employed musician's national insurance payments. The HMRC ruling prior to the reclassification meant that any engager of musicians whether it be an orchestra or a studio was liable for employer's national insurance contributions. Fortunately, the HMRC did not actively enforce this ruling as if it had it would have shut down a number of orchestras, and driven a significant amount of valuable recording work abroad. Following a lengthy consultation, the HMRC agreed with the MU that these musicians were properly self-employed and should therefore be paying self-employed persons national insurance contributions. This meant that the orchestras, theatre producers and studios etc. could breathe a sigh of relief and work levels for musicians in the UK could be maintained.
Now the bad news. Near the end of last year news reached us of a change in the way that VAT is payable for digital commerce in the EU. The new EU ruling says that rather than VAT being charged at source for any digital commerce in the EU, it has to be charged at the rate prevalent in the country where the consumer you are selling to resides. The consequence of this is that if you are selling digital downloads through your UK based website, instead of paying no VAT (if you fall below the UK VAT threshold) or VAT to HMRC (if you are VAT registered) you will now be obliged to pay VAT at the rate applicable in the country where your customer resides whether you are registered for VAT in the UK or not. This represents a huge administrative and not insignificant financial burden for UK sole traders and those operating a small to medium enterprise (SME).
HMRC have acted quickly to try and ease the burden by opening up a scheme called the Mini One Stop Shop (MOSS). This scheme works as follows: once you have registered for a UK VAT MOSS scheme, you submit, each calendar quarter, a single MOSS VAT Return and single VAT payment to HMRC. HMRC will then forward the relevant parts of your return and payment to the tax authorities in the member state(s) where your consumers are located. This fulfils your VAT obligations. By using the VAT MOSS scheme, you won't have to register for VAT in every EU member state where you make digital service supplies to consumers. Initially, this scheme was only available to UK traders who are currently VAT registered in the UK but HMRC has now opened it up to all UK traders. More information about the MOSS scheme is available here: https://www.gov.uk/register-and-use-the-vat-mini-one-stop-shop
The MU has been able to establish that if you are selling through a digital aggregator like CD Baby then it will most probably be their responsibility to deal with the VAT - CD Baby has confirmed to the MU that they will take on that duty - but you should check with your aggregator that this is the case.
In any case this is an almighty pain in the backside for low level traders selling their music in digital form in the EU and, from what I can ascertain, a sledge hammer to crack a nut.
It would appear that Brussels has introduced this new legislation to catch the huge monolithic corporates who choose to run their businesses out of countries which have either low or nonexistent VAT rates, and they do this whilst also operating all manner of other tax avoidance schemes. I don't need to name them; we all know who they are. Excellent news and well done Brussels I hear you all say and I would agree. Unfortunately the EU seems not to have recognised the massive burden this will place on SMEs and sole traders. Surely it wasn't beyond the wit and wisdom of Brussels bureaucrats to realise what the impact would be and to make the legislation subject to a threshold of annual revenue, say £100K?
On other more positive tax news, the chancellor announced last year that he will be conducting a consultation with a view to introducing tax breaks for orchestras. All very good news I guess but would it be completely inappropriate for me to suggest that, rather than spend squillions on a consultation which may or may not deliver tax breaks for orchestras, they should simply pay a supplement to orchestral players so that they can be paid a wage commensurate with their years of training, dedication and cultural worth.
For that matter, why stop at orchestral musicians? For that matter, why stop at musicians? The UK's grass roots music venues are struggling to survive and we all know this is where the high earning (high tax paying, we trust) big stars of tomorrow cut their teeth. The music venues need a tax break lifeline right now.
The UK film and gaming industries have both enjoyed generous tax breaks over the last few years. It's now high time that grass roots musicians and music venues got a break.