HMRC has updated its guidance for actors and other entertainers following a recent decision by the Court of Appeal (CoA) in the case of ITV Services Ltd (ITV), which found that fees paid according to national collective agreements are to be treated as salary for National Insurance purposes.
ITV's appeal to the CoA followed the company's earlier unsuccessful appeals against decisions upheld at both the First Tier Tribunal and the Upper Tribunal that actors' contracts provide for remuneration in the form of salary which is liable to NIC.
The argument focused primarily on whether actors engaged by ITV were to be treated as 'employed earners' for NIC purposes by virtue of the fact that the payments made to the actors by ITV were 'by way of salary', even though some of the payments were for being available at specific times rather than for an actual performance.
The CoA held that attendance day payments made to actors under ITV contracts were salary payments for NIC purposes, rather than earnings from self employment, because they are set according to rates agreed under national collective agreements between producers and the actors' union Equity under the 'All Inclusive Fees Equity Agreements', the 'Weekly Equity Agreement' and the 'Option Equity Agreement'.
The court ruled that such payments have the characteristics of salary and not fees and are not payments in respect of acting performances.
As a result, hourly or daily payments such as overtime or overage payments to which an entertainer is entitled under the contract, even though contingent and whether or not actually paid in practice, are computed by reference to the amount of time for which work is performed.
This ruling does not cover fees paid under All Rights Contracts, which HMRC has agreed are outside of the NIC regulations.
HMRC says it considers that the principles established in this and the previous decisions in the tribunals cover all 'entertainers' as statutorily defined in the regulations, that is 'a person employed as an actor, singer, or musician or in any similar performing capacity'.
HMRC now expects voluntary compliance with the regulations, and says it does not intend to undertake concerted compliance activity in the media sector in respect of entertainers as a direct result of the ITV case.
It will, however, continue to apply its normal risk-based approach to identifying individual cases which represent a high risk and reserves the right to investigate such cases.
It will also continue to scrutinise those cases currently the subject of investigation.
A public consultation on consultation on options for amending the NIC treatment of entertainers has recently closed, and HMRC has indicated its preferred option is to revoke those provisions of the regulations that relate to entertainers with effect from 6 April 2014.
If this happens, such an amendment would not have a retrospective effect, HMRC says.
It will be publishing a summary of the consultation responses and confirm the intended way forward later this year. The latest guidance is HERE
