By Adam Caplan, Partner

You’re about to read the story of VAT Attack, a band formed in Manchester (and my imagination) who will, hopefully, outline my arguments and advice in the later stage of this article.

Yes, their story is a bit of fun and any reference to persons living or dead is completely coincidental but, as an accountant who specialises in the entertainment sector, you’d be surprised at how accurate this is.

Without further ado, allow me to introduce VAT Attack:

The story of the band

VAT Attack weren’t supposed to get this far.

Four mates from Manchester – Tom on vocals, Liam on guitar, Jay on bass, and “Spreadsheet Dave” on drums – started out like many bands do: cramped rehearsals in a mouldy garage, playing to a handful of mates in the back room of a pub, and being paid in free pints and the occasional tray of chips.

Then one night, someone filmed their song “Balance Sheet Blues” and posted it online.

By Monday morning, the video had gone viral.

Suddenly, the lads weren’t just local noisemakers, they were fielding calls from promoters, selling T-shirts with “Double Entry Forever” on the front, and watching their Spotify streams creep past the tens of thousands.

The problem was that they had absolutely no idea how to deal with money.

Tom thought they could just split the cash and not tell anyone.

Jay suggested “setting up a PayPal” as if that solved everything.

Spreadsheet Dave (who really did study AAT before swapping it for drumsticks) raised the alarm: “lads, HMRC isn’t going to accept ‘cash in the van glovebox’ as bookkeeping.”

And he was right.

From that moment, the VAT Attack boys needed more than a rehearsal space.

They needed an accountant.

Setting up a band as a business

Most new bands ask the same question: how do we set up as a business?

For VAT Attack, I would want to explain the three routes:

• Sole trader – easy, but each member would be responsible for declaring their own share. Not practical with gig money flying around.
• Partnership – the most common route. The band is treated as one business, profits are split, and each member is taxed on their share. Simple, fair, and HMRC-approved.
• Limited company – a smart move when the money really ramps up, offering protection and flexibility, but it adds admin.

VAT Attack chose a partnership because gave them structure without drowning them in paperwork.

How to account for gig money, merch money, and streaming money

Once the gigs rolled in, they had three main income streams:

• Live fees – straightforward, paid by venues and promoters.
• Merch sales – they shifted a lot of shirts after shows, but this meant thinking about VAT once sales got big enough.
• Streaming royalties – a slow trickle, but it kept coming in from multiple platforms, which meant keeping proper records of every statement.

Add in a European tour later in the year and suddenly foreign taxes and double taxation treaties entered the picture.

Practical note: income from abroad often has tax withheld locally, so keeping paperwork and applying treaty rules is essential.

Expenses that hit the right notes

Bands love to ask what they can claim.

VAT Attack are no different. Their questions will sound familiar to any musician:

• “Can you claim for your instruments?” – yes, capital allowances usually cover this.
• “Can you claim for rehearsal space and studio hire?” – yes, wholly and exclusively for business.
• “Can you claim for stage clothes?” – if it’s a costume (think sequins, not skinny jeans), then yes. Everyday clothes? No.
• “Can you claim for a tour van?” – yes it’s claimable, but they’ll need to watch for personal use adjustments.

As with any business, it’s worth speaking to an accountant who can tell you what to claim for, whether you’re entitled to it and when you should submit your claim.

It’s usually true that an accountant that specialises in your sector (entertainment for examples) will be better placed to do this for you.

Practical note: the golden rule is whether an expense is wholly and exclusively for the business of being a musician. If it’s partly or wholly for personal use, that’s not claimable in most cases.

My business and tax advice for bands in the real world

VAT Attack’s story is fictional, but the issues are very real for every band and musician. Here’s the advice I always give:

1. Get set up early – don’t wait until after your first tour. Choose the right structure (sole trader, partnership, or limited company) before money starts flowing.
2. Keep proper records – spreadsheets, apps, cloud software, whatever works. Cash-in-hand gigs still need logging.
3. Separate band and personal money – open a dedicated bank account so you know what belongs to the band.
4. Track income streams separately – gigs, merch, royalties, publishing, session work. Knowing which earns best helps with planning.
5. Understand VAT – merch can tip you over the threshold fast. Plan for it, don’t be surprised.
6. Think international – tours and streaming often mean foreign tax. Check treaties, and don’t assume HMRC will sort it out for you.
7. Budget for tax – nothing kills the mood quicker than finding out you blew the tax money on a new amp.
8. Get professional help – a good accountant is as important to your career as a good manager.

Music is art, but a band is a business.

The ones that last are the ones who treat both with the respect they deserve.

The VAT Attack bandmates may joke about it, but their success depends as much on their accounts as on their chord progressions.

So, if you’re in a band and starting to make money, don’t wait until the taxman comes knocking.

Take a leaf out of VAT Attack’s book and get your finances tuned up before you hit the wrong note.

If you’d like to speak to an accountant in the entertainment industry, please get in touch!

P.S: ROCK ON!