Strategies to Minimise Tax Exposure for UK Music Festival Entities.

The tax burden for music festival organising entities in the UK can be a significant cost to consider in their financial planning. Being prepared for taxes that may be due is essential to avoid any unexpected bills that can financially cripple an organisation. What strategies can organisers employ to minimise their tax exposure each year.

Festival organisers need to consider their potential tax liabilities in the financial planning process and optimise their operations to take advantage of potential relief where available. Careful financial decision making can reduce the tax liability or delay tax payments to help cash flow. The UK financial year runs from 5th April every year and most organisations use the same financial year, however, the tax office (His Majesty's Revenue & Customs -HMRC) do provide an allowance of up to 9 months to settle payment of tax due. Audited accounts must be submitted within 12 months of the financial year end. 

The Organising Entity Finance Function.
Most organising entities operate with a small internal finance function who perform daily invoicing and payments with month end reports and cash flow forecasts, they will usually employ an external accounting firm to produce annual audited accounts for submission to HMRC. As the finance function will be responsible for paying contractors careful consideration needs to be given to clarifying them for tax purposes which is essential under the HMRC’s IR35 rule where the tax burden is with the contractor. Employees will usually fall under a PAYE scheme where tax is deducted at source. 

Tax Relief Schemes. 
The UK government has created a number of tax relief schemes which festival organisers can consider and currently these include the Theatre Tax Relief (TTR) and the Orchestra Tax Relief (OTR) if live performances have a theatrical element or include orchestral programmes. It’s worth discussing festival plans and content with local authorities who may offer tax relief or grants for cultural events that impact favorably in a local community. The tax relief schemes and rules vary and change over time and it’s worth organisers using an events specialist accountancy and tax specialist firm to help them take advantage of current schemes. 

VAT. 
The rules regarding VAT (Value Added Tax) can be complex and in the UK it’s currently 20% on all consumer purchases however, some things are exempt from VAT and the rate businesses charge depends on their goods and services. Most festival organising entities will need to register with HMRC for VAT which enables them to claim back any VAT paid on most of their operating business expenses including travel, hospitality, food, and fuel for example. 

Capital Expenditure and Investment Strategies. 
The HMRC makes provisions for tax allowances on capital expenditure so investments in temporary structures like stages and IT equipment to enable RFID systems may qualify. The Annual Investment Allowance (AIA) scheme is a tax incentive that allows UK businesses to claim 100% of the cost of qualifying equipment and machinery against their taxable profits. Unlike regular depreciation methods, AIA enables a faster tax relief for businesses by providing a significant allowance upfront. 

Company Structure. 
The type of company structure chosen by organisers can significantly impact of their tax liability with Limited companies and Partnerships being the most popular company type. However, converting to a CIC (Community Interest Company) can open access to additional tax exemptions and grants. Limited companies and partnerships will usually be liable for corporation tax which is 25% on profits over £250,000 and 19% on profits up to £50,000 with a marginal rate between £50,000 and £250,000 using the variable marginal relief rate.  

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