Hello. I am an Accountant (and a bass player!) and always end up shouting at this sort of thread, so thought I'd actually sign up and say something constructive.
You don't give any indication of how much money you're talking about, so I'm going to make some assumptions. I gather a lot of amateur bands who are mainly playing for fun barely cover their expenses, and I doubt HMRC will come chasing you about the tax on £3.50 beer money, so I'm going to assume you're actually making a reasonable amount of dough. Here are a couple of simple examples - real life is invariably more complicated and I'm not a tax specialist.
In simple terms, any profit that's made (income less allowable expenses), [i]someone[/i] will pay tax on it. It doesn't matter whether or not someone takes that cash home. In the absence of any agreement to the contrary, you'd most likely be deemed to be trading as a partnership with equal shares. So you might have total takings of £12,000. Less expenses of £6,000. That's a profit of £6,000, split between 6 band members, so each band member has to pay tax on £1,000, at either 20% or 40% depending on how much you earn in your day job. You can then each take £600 out of the kitty and use some of it to pay your tax, leaving you with either £400 or £200 each in your back pocket and £2,400 in the fund. That money belongs to the band members.
If you did decide to set up some form of limited company, things get a heck of a lot more complicated. For legal and tax purposes the company is effectively a separate "person". So let's say you make £6,000 after expenses in a limited company, then as suggested above everybody invoices the company for £600. This time, the individual band members will pay tax at 20% or 40% on their £600, leaving you with £480 or £360 in your back pocket. The 6 lots of £600 are an expense to the company, so the company's profit is now £6,000 less 6 x £600, which is £2,400. The company will then pay Corporation Tax on that profit at 20%, leaving £1,920 in the fund. That money belongs to the company, not the band members.
Hope that's some help.
