This Gob has almost nothing to do with singing abroad, but by the time you are singing abroad your career will probably have progressed to a level where this über-sexy subject has caught your attention. Yes, let me talk you through the warmed, scented massage oil that is... Value Added Tax. Mmmmmm.
Reading this could save you quite a lot of money.
There, that's got your attention.
Once you get an agent you'll quickly realise that not only does he/she charge you 15% in commission for every concert you do (hopefully less for every opera performance) but also another 20% of that on top in VAT. So on a modest fee of £1000 you need to pay your agent £180 (£150 plus £30 VAT). On a good opera job where your gross fee for the run tots up to £20,000, you may find yourself saying goodbye to £600 in VAT.
But you really don't have to. You can get it back.
If you are grossing more than £73,000 in any 12 month period then you HAVE to register for VAT by law, but if you are earning much less you should still seriously consider registering voluntarily.
Once you are registered for VAT then you can claim back any VAT you have had to shell out on business-related expenses. The chief amongst these are your agent, hotels when you're working, your accountant, your mobile phone, car servicing and even the VAT on a new laptop. You can get the VAT back on fuel but only if you pay a regular so-called "scale charge" and personally I don't find it worth it. You have to drive a lot of miles in a year.
You can't claim back the VAT on a new car so forget that. Train and plane tickets don't include any VAT so there's nothing to be saved there. Singing lessons and coachings are usually VAT free, though I guess a VAT registered coach would have to charge you tax on their services. Ive certainly never been charged VAT for either.
"So why aren't I registered already", you may be asking yourself, "when it can save me so much money?"
There are two caveats.
Once you register for VAT you have to charge VAT on every fee. So your £1000 fee now costs your employer £1200. That's not a problem at all for professional companies who just claim back the VAT you charge them, but it can cause you problems if a lot of your work is for, say, amateur choral societies, which it may well be in your early years. They cannot claim back the tax and if they cannot afford to pay you another £200 (and the chances are massive that they cannot afford it) then you'll probably have to make the fee inclusive of VAT, in which case your fee has suddenly dropped to £833.33 (plus 20% VAT equals £1000) and you have to hand £166.67 to the taxman. (Having written all that I realise that the likelihood of a small choral society forking out £1000 for a concert is about as remote as a certain popular mezzo making her way through the role of Carmen.)
The other caveat is that you really need to be on top of your book-keeping and accounting skills. There's really no need to get an accountant to do it for you, unless you are a total dimwit (see Carmen remark earlier). Every three months you have to do a VAT return where you tot up the VAT you've collected on fees (your Output) and deduct the VAT you've paid on expenses (your Input) and pay over the balance. You are, in effect, a fully-functioning tax collector. It sounds grim but in truth it's very straightforward and usually takes me about an hour, four times a year. (It also keeps me on my toes with my accounts, which is no bad thing.)
I work abroad a lot but you don't charge VAT to foreign employers, so it's quite common for me to get to the end of a quarter yet collect no VAT on my fees. However, my agent still has to charge me VAT on the commission, and I'll have paid lots of VAT on my UK expenses. So when I come to do my VAT return I have often paid more tax than I've collected; meaning that I get a sizeable refund popping into my bank account after I've handed in my figures (which you do online these days). Which is rather nice.
You can ask to do your VAT return just once a year but I don't believe that's a good idea unless you are prepared to stick all the VAT you collect during the year in a special account. Imagine the shock of discovering you owe the VAT man, say, £10,000 which you've already carelessly spent! Nope, once every three months is good for me. Oh, and don't even think of being late with your VAT Return or you'll be storing up a large heap of bother to deal with. Inspectors, fines... You get the picture. You've got their tax and that's the end of the matter.
If you register will probably find yourself having to issue VAT invoices to each of your employers, setting out the fee, the VAT and the total. As I used to have to do these on a typewriter, with carbon paper, nowadays there is nothing to whinge about. These days I can even do one on my phone for gawd's sake. In fact my agent now sends out all of my VAT invoices so all that fancy technology is wasted.
Once you get the hang of it, it is very easy. Google VAT and look at the HMRC website.
If people want a seriously detailed guide to "doing your VAT" I can do that too, but only if you ask nicely. This was just intended as a taster of what you can look forward to. Don't wait to see if you can cross the £73,000 threshold. Get onto it sooner and save yourself some money.