Music Venue Company Structure… are you doing it wrong?

What’s your company structure?

Most Grassroots Music Venues (GMVs) are currently structured as a limited company, sole trader or business partnership:

LIMITED
COMPANY

A Limited Company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company, after it pays corporation tax. The company can then share its profits.

SOLE
TRADER

As a Sole Trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them. You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone. You’re personally responsible for any losses your business makes.

BUSINESS
PARTNERSHIP

In a Business Partnership, you and your business partner (or partners) share responsibility for your business. You can share all your business’s profits between the partners. Each partner pays tax on their personal share of the profits.



Definition & Profit

As you can see, all of the normal company structures being used by GMVs are defined by the Government, the Treasury and HMRC for their ability to make and distribute profits.

Extensive research carried out by Music Venue Trust, matched to work carried out by partners in Europe, has established that with regards to the presentation of live music, GMVs’ expenditure on cultural activities equates to 129% of the money arising directly from those activities. In short, GMVs aren’t making any profit from putting on cultural activities.

Analysing Profit

Most GMVs are started by people with a passion for putting on live music in their town or city. Building a company structure has never been a key factor for getting those gigs underway. As a result of history, passion and focus, GMVs are governed by structures that implicitly suggest they are seeking to make a profit from providing a cultural activity or event, when, in reality, any profit made comes from other activities such as alcohol sales, food retail, even merchandise.

Many people have questioned why GMVs are unable to garner support from the Government or local authority for the work they do promoting culture and providing a platform for artists. Music Venue Trust has been engaging with government for over two years to analyse this issue; campaigning for investment, business rates or tax advantages for this work – including, but not limited to, relief from VAT on tickets at small music venues. There is a lot of support for the work that GMVs do, but that support is often qualified by discussion about company structures. Government, and government agencies such as the Treasury and HMRC, don’t understand why GMVs have apparently been structured to establish what they will do with their profits if those profits don’t exist.

Government has specifically created cultural investment programmes, tax and rate advantages for cultural entities.

VAT Notice 701/47: Culture

VAT Notice 701/47 explains when admission charges to certain cultural exhibitions and events can be exempted from VAT, and by whom. You can apply for relief of up to 80% on business rates if a property is used for charitable purposes, with ‘discretionary relief’ (up to 100%). Provided by local councils to ‘top up’ certain reliefs to give businesses and charities extra help; almost all theatres, arts centres, museums and libraries qualify for such relief – so too do many cinemas and even bowling alleys.

In the case of both VAT and business rates, the Government already has in place schemes to acknowledge the important role played by culture in supporting communities, and in developing social and economic outcomes. GMVs are a perfect example of such activity, but their company structures mean the Government has been unable to recognise what they do through existing reliefs.

Creating new schemes specifically for GMVs is littered with obstacles for the Government and local authorities; aside from the time it would take, there is also the matter of issuing schemes intended for GMVs and then finding that any place that puts on live music at any time in the UK is suddenly claiming to be a GMV in order to access tax and rates relief. Whilst work between MVT and government will continue, it seems obvious that GMVs should look at their existing company structures and see what steps they can take to access existing reliefs.

VAT Cultural Exemption a presentation by Anderson Anderson & Brown, Chartered Accountants

Community Interest Company

A Community Interest Company (CIC) is a type of company introduced by the UK Government in 2005 under the Companies (Audit, Investigations and Community Enterprise) Act 2004, designed for social enterprises that want to use their profits and assets for the public good.

A Social Enterprise is an organisation that applies commercial strategies to maximise improvements in human and environmental well-being. In this context, human well-being includes the presentation of cultural opportunities to the public, just like that being carried out by GMVs.

At Venues Day 2016, we presented a seminar on how to create a Community Interest Company (CIC) to deliver all your cultural activities, from booking through promoting, ticketing, production, and every aspect of putting the artist on stage. This is not a tax evasion or business rate management scheme; it is correctly putting in place a company structure to reflect what it is GMVs actually do.

There are some trade-offs, such as having the complete freedom to do what you want to do, in order to comply with the intent of a CIC, but most GMVs these days aren’t run by a single individual who insists that only their vision is the one that meets the needs of their local community. They are collaborative spaces, run in great part by volunteers.

The bar at a GMV is a commercial activity; it might make a profit.

The cultural activity is an inherently charitable activity, it cannot make a profit, and in practice, even if it does, it simply invests that back into additional cultural activities.

Company structures that reflect the reality of the two roles of a building that houses a GMV can remove the VAT burden from tickets, and create a conversation with the local authority to remove the burden of business rates for the activity that is delivered by a CIC, whilst leaving commercial activity, the bar, food, merch, where it belongs; in the commercial profit-making sector.

These are practical outcomes that can support Music Venues to continue to offer great cultural opportunities to their local communities.

Go and ask your local theatre or arts centre that has a bar; a CIC or charity is already running the cultural activities and a commercial entity is running the bar/catering.

GMVs should adopt this model, not because it might involve much needed tax or rate relief, but because it is the correct one and you are entitled to the support that the Government has put in place for you.

Further Information

Following Venues Day 2016, Music Venue Trust will publish a simple guide to creating a CIC.

Meanwhile, find out more here.

2017-01-05T15:55:13+00:00 October 18th, 2016|

Leave A Comment

Show Buttons
Hide Buttons