Q – Jim and Oliver from Wexford ask, “What expenses are musicians legitimately entitled to deduct from their earnings from a tax point of view?”

A – The general principle is that you can deduct any expenses that are wholly and exclusively incurred in the pursuit of your trade. So as long as you can show that the expense would only have been incurred in the course of your trade as a musician then you should have no problem claiming the expense as a legitimate deduction before calculating your income tax liability. One exception is the purchase of equipment, which will be classified as a fixed asset of the business by the revenue and so you are only entitled to write off 12.5% of the cost per annum. Also remember that if you are registered for VAT (and you must register if your income exceeds €25,500) it is the VAT exclusive figure that is allowed as a deduction.
Some examples of the type of expenses you can write off, and this is not an exhaustive list, are: recording costs (covers studio time, rehearsals, producer fees, tapes, duplication, food, etc.), touring costs (includes ticketing, crew fees, band fees, per diems, travel, accomodation, promoters fees etc.), management commission and expenses, marketing and promotion (includes videos, posters, photographs etc.), merchandising costs (includes the cost of the goods and paying the staff to sell them) and administrative expenses such as legal and accountancy fees, light and heat, telephone, staff wages, equipment repairs etc.

Answers supplied by O.J. Kilkenny and Co. Chartered Accountants, specialists in the entertainment industry. Contact: [email protected] or call Alan Duffy (01) 661 1588.