HMRC's proposals to simplify the national insurance contribution (NIC) regime for self-employed entertainers have been welcomed by CIOT, which says the current approach creates unnecessary complexity and confusion.
Since 1998, freelance actors, musicians and performers have been subject to regulations which deem their earnings to be subject to Class 1 NICs. These were introduced in part to ensure that they received enhanced benefits during periods of unemployment, but have come under criticism for being difficult to administer given working patterns within the entertainment industry.
A consultation on the options for reforming this approach closes next week, 6 August, and HMRC has said its preferred option is to repeal the regulation and moving self-employed entertainers' earnings into the Class 2 and 4 NIC regimes.
CIOT described this as 'a positive and sensible step forward', given the negative impact of the current rules which include the higher cost for both employers and individuals of paying Class 1 NICs and the practical difficulty of accounting for Class 1 NIC on additional use and similar payments that arise long after the initial work has been undertaken.
Colin Ben-Nathan, chair of CIOT's employment taxes sub-committee, said: 'We believe that the regulations applying to self-employed entertainers, whereby many are treated as employees for NIC purposes, do not work effectively, are administratively burdensome and should be changed. The self-employed should be subject to Class 2 and Class 4 NIC, with Class 1 NIC applying only to employees and employers, unless there is very good reason to do otherwise.'
While there are concerns that self-employed entertainers could receive less in terms of benefits when out of work if subject to Class 2 and 4 NICs rather than to Class 1, HMRC has said that for those most in need of support, means-tested Universal Credit should provide at least the same level of support as does the Jobseekers Allowance.
Ben-Nathan said: 'This is an important point and should be verified, albeit a similar position applies on benefits to all those who operate on a self-employed basis.'
