UK tax relief can apply to recording advances

March 2016




The UK’s Treasury minister has confirmed that the 2001 tax relief which allows creators to average their income over two consecutive years can be applied to recording artists when they are paid advances by their record labels.  The relief recognises the volatile nature of earnings in the creative sector – 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 Featured Artists Coalition sought the clarification on exactly if and when the relief applied to 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”. DAvnavces are of course advance payments of royaltieds that may become due at a later date.
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”.


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”.
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”.

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