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Government clarifies tax relief for recording artists
By Andy Malt | Published on Wednesday 10 February 2016
The British government has confirmed that a tax relief which allows creators to average their income over two consecutive years can be applied to recording artists paid advances by record labels. UK Music and the Featured Artists Coalition sought the clarification on exactly if and when the relief applied to musicians.
This relief was introduced in 2001, recognising that authors and artists often have one very profitable year followed by one that is less so. Where profits are “wholly or mainly derived from literary, dramatic, musical or artistic works or designs” it is possible to average the profits for successive tax years. This reduces the burden of the more profitable year, and can in some circumstances drop one year’s tax bill into a lower band, meaning less tax is due.
UK Music and the FAC asked for clarification on whether recording artists who receive an advance from a label are covered by the system, because the rule is slightly ambiguous saying that “profits must come from royalties or disposal of the works rather than from the provision of services”.
In a letter responding to both organisations, Financial Secretary to the Treasury David Gauke MP said: “I am happy to confirm that the advance of royalties are within the scope of the averaging rules for creators of literary or artistic work. The advance of royalties is exactly the sort of situation these provisions are intended to address for creative artists such as recording artists”.
Responding, FAC Chair Sandie Shaw said in a statement: “Recording artists are prone to fluctuating finances. A very good year can then often be followed by one which isn’t so profitable. I am delighted that there is a mechanism in place which can allow Featured Artists Coalition members to not be disadvantaged by the tax system and one that respects the nature of our creative endeavours”.
While UK Music CEO Jo Dipple added: “I am pleased that government has clarified that recording artists must be treated by HMRC the same way as other creators with regards the averaging of profits over successive tax years. I encourage eligible artists to make full use of this clarification”.
