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No accounting for haste

NXT Features
3 November 2017
John Roddison
When the shoebox fills up with receipts and the taxman clears his throat, it might be worthwhile for an act to find help with their finances, but it’s important to take this step at the right time. Rob Sandall reports

 

It is of course inevitable as an act finds its feet, they also find logistical and administrative duties. As unromantic as it might seem, an act is effectively a small business from the very beginning, with its revenue streams, its profit and loss and of course its taxes.

Staying on top of the paperwork needn’t be the responsibility of the artistes themselves, however – those who can outsource to an accountant they trust. But with emerging acts often lacking in liquidity during their formative years, finding an accountant isn’t necessarily easy.

Grant Court, who has worked with musicians as a director at SRLV Accountants since 2005, mulls over what compels professionals of his ilk to take the leap and get in on the ground with grassroots artistes.

“It’s tricky, isn’t it?” he says, “because you either have to find acts by going off people you know and trust – whether that be the act, or the manager, or a label – or you risk it and simply go for acts who play music that you like.

“But at that stage, there’s only so much that you can do to begin with in either case. In the first instance, I tend to offer general advice and essentially point people in the right direction in regards to how they should be keeping their records. I’ll give them a rough guide to work to and talk them through it.

“Even if that just amounts to putting all their receipts in a shoebox, that’s a good start. Then when a deal comes along, or they’re starting to make bigger money from their touring efforts, that’s when they can pay an accountant to help.”

If that deal does come, Court points out that it might well be worth running past an accountant, if only to ensure the artistes own responsibilities are fully understood.

“We won’t put ourselves into the middle of negotiations of course, but we do like to see the deal they’re signing before they put pen to paper, if possible,” Court explains.

“For the most part, that’s so we can help the artiste understand what will be owed when, and how it will be paid, both in terms of tax and recoupment.”

“It doesn’t necessarily mean that any of this advice will change the deal – it’s more making sure they have the facts in their head, which might help them to decide on putting money back to plan ahead, for instance.”

Once an act has taken an accountant on, they might be employed for a myriad of purposes outside of simply filing tax. Court points out that sometimes a sharp eye for budgets is worth a great deal.

“Our job is to focus on minimising the artistes’ taxes and maximising their profits,” he says.

“The moment that someone gets to a point where they can pay for an account is probably the point where they’ll need an accountant.”

“We have teams with different specialties in-house who concern themselves with different elements of getting artistes’ money back – for chasing down royalties, for instance – so as an act grows we’re able to allocate greater resources to them.”

“Sometimes, though, it’s as simple as casting an eye over budgets and making sure that everything adds up and all expenses are covered. It’s incredibly easy to miss something if you’re not used to budgeting for tours.”

 

Firm foundations

John Roddison, MD of Sheffield-based accountants Brown McLeod, has worked with acts for three decades, although as he immediately points out, it’s not just the artistes that need help filing their taxes.

“I picked up my first music clients in 1986, including the producer Stephen Street who was working with The Smiths, and Steve Lamacq, who at the time was a journalist on the NME,” Roddison says.

“I then started taking on bands and attending their gigs, which led to more introductions as virtually everyone in the music business needs an accountant, from the band and tour managers to the guitar techs and sound engineers.”

Grant Court

Roddison, like Court, is keen to see emerging artistes start to understand their responsibilities as quickly as possible, putting them in the best possible situation when their time comes.

“We incubate acts at the early stages so that if they break through, the correct structures – companies, bank accounts, VAT registration and tax registration – are all in place,” he says.

“It’s good practice to start to understand the financial and tax implications of being in a band.

“Even if they’re not making any money at the early stage, they’re in business and liable to file tax returns. Additionally, there may be losses that can be set against other taxed income, creating a tax refund.”

Understanding refunds of this nature, Roddison says, goes a long way towards the potential for profit, especially during this stage of an artiste’s career.

“Often bands have been going for a couple of years before they hit revenue streams so it is important to look at expenses incurred to get them to that position,” he says.

“This can include musical equipment, losses on touring and rehearsal costs, all of which can be claimed against future income.

“In addition, as performing artistes, even stage clothes, make-up and hairdressing bills can be claimed in the right circumstances.”

He adds that pre-appointment of an accountant, there are easy enough measures to take to make life easier in the long run.

“It’s generally advised that a separate artiste bank account is opened to pay in all touring fees and pay out all expenses,” says Roddison.

“It’s also easier for record keeping if a debit card is used with the bank account, as this reduces the amount of cash expenses that are needed, and gives an accurate record of all activity to the date an accountant is appointed.”

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