Band as a company - tax etc

[foxyFuze]

Hello all,

I've been doing a bit of research into this and wondered if any folks here might be able to clarify / offer their thoughts and experiences on the following:

I'm about to invest in upgrading our band's PA system and thought 'why not register as a company for both performance and kit rental purposes, buy the gear VAT refundable and then hire it out?'   I'd have to take out liability insurance and the like, of course.
Anyone else do this?
I tend to buy second-hand equipment but in this rare instance of buying from new, this seems to be a good idea, with (probably fairly little) earning declared.

Thanks

[mrtcat]

It's a big decision. If you register as a limited company you will have to submit accounts to companies house every year and file a tax return. If you go VAT registered you will have to add vat to your price for every gig so you will need to add 20% to your fees to cover this. You will need liability insurance and insurance to cover loss or damage to your equipment. 

If you ask me, unless you are looking at turning over a decent amount £50k + then the cost of all the above will outweigh the benefit. I would be more inclined to stay as you are, let all members self assess for tax and keep it simple. 

If you want to make it a business then write a bloody good business plan. That will tell you far more about how viable it is than asking here.

Edited October 20, 2018 by mrtcat

[foxyFuze]

Valid points, thank you. Yes, having thought through it more it seems like far too much complication.

[Steve Browning]

From the VAT perspective you would have to apply the Lennarz principle (used to be used for mega yachts and aircraft). You would have to demonstrate that you were actively seeking to rent out the equipment and pay commercial rates for your own use. 

You could do it as a partnership as opposed to a company. The VAT registration would apply only to partnership activities and not anyone's personal activity. VAT on all gig fees (you would lose 1/6th as VAT), the same on all other UK sales.

If you were to sell in Europe you would have to register in each country too. Gig fees would be VAT free.

Unless you are buying big I would suggest it's probably not worth it for the VAT you would claim back.

[ped]

Don’t you only register for VAT if you’re turning over 80k?!

[ambient]

11 minutes ago, ped said:

Don’t you only register for VAT if you’re turning over 80k?!

I believe that’s right, yes.

[stingrayPete1977]

16 minutes ago, ped said:

Don’t you only register for VAT if you’re turning over 80k?!

That's what I charge for a dep gig if mustang Sally is in the set list. 

[Steve Browning]

No. You can register for VAT voluntarily as long as you are in business. The registration threshhold is the compulsory registration figure.