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Brief issued following ITV decision by appeal court
The principles established by a recent high-profile tax case cover every entertainer as defined by social security rules as “a person employed as an actor, singer, or musician or in any similar performing capacity”, HMRC have confirmed.
The department has set out its view in reaction to the July decision by the Court of Appeal in ITV Services v CRC, which concerned the employment status for National Insurance (NI) of actors engaged by the commercial broadcaster under specific contract types.
The court dismissed ITV’s appeal, finding that the application of the Social Security (Categorisation of Earners) Regulations 1978 must be determined according to the terms of an entertainer’s specific contract.
The taxman notes in Revenue & Customs Brief 29/13 that the appeal court agreed with the Upper Tribunal that hourly or daily payments, including overtime, to which an entertainer is entitled under a contract are computed by reference to the amount of time for which work is performed, and are consequently payments by way of salary.
This part of the judgment is set to have significance for actors and musicians whose contracts are subject to the terms providing for payments under collective agreements with the Equity and Musicians’ Union.
HMRC do not intend to undertake concerted compliance activity in the media sector in respect of entertainers as a direct result of the ITV case, but they will apply the law in line with the decisions of the Upper Tribunal and the Court of Appeal where tax officials are investigating an entertainer or a media company.
The department’s position regarding retrospective liability is set out in Revenue & Customs Brief 19/12. The extent to which the taxman will seek to apply the Court of Appeal decision retrospectively will be determined by different factors.
Where the Revenue has issued a written opinion to a party that Class 1 NI contributions are not due in respect of payments made under a particular contract because they did not consider those payments to be “by way of salary”, the tax authority will not seek recovery retrospectively of unpaid contributions payable before 6 April 2011.
If HMRC provided a written opinion to an engager that Class 1 NI contributions are not due in respect of a particular contract, and the engager used identical contract(s) to engage other entertainers, the department will not seek arrears of contributions payable before 6 April 2011 in respect of these other contracts.
The taxman reserves the right to seek to recover contributions arrears under normal compliance subject to the provisions of the Limitation Act 1980 in circumstances in which no written opinion has been given.
