CIOT welcomes freelance entertainer consultation

Wednesday 31 July 2013

The Chartered Institute of Taxation (CIOT) has welcomed HMRC proposals to change the way in which freelance entertainers pay National Insurance.

Colin Ben-Nathan, chair of CIOT’s employment taxes sub-committee, said that HMRC has put forward “sensible” proposals to stop considering self-employed media and entertainment workers as employees for National Insurance purposes.

Contractors in every industry are aware of the pitfalls of self-employed tax. For freelancers in the entertainment and media industry, National Insurance is currently among the most confusing contributions. Under the current system set out by the Social Security (Categorisation of Earners) Amendment Regulations 2003 actors, singers, musicians and other similar performers who choose to work for themselves pay their social security as employees. This means that they are expected to pay class one contributions.

However, under the proposals set out by HMRC for consultation, this would be readjusted so that freelancers are classed as self-employed for all of their tax affairs. As a result, they would be expected to pay class two and four contributions instead of the current class one.

HMRC says that in general, entertainers are engaged under terms of self-employment and that this should be their employment status for all forms of tax.

CIOT has welcomed the plans, saying that classifying a self-employed performer as employed for National Insurance purposes creates “unnecessary complexity and confusion” within the UK tax system. There would have to be a strong justification for implementing such a rule, the institution says, which it cannot currently see.

“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,” says Mr Ben-Nathan.

“The self-employed should be subject to class two and class four NIC, with class one NIC applying only to employees and employers, unless there is very good reason to do otherwise.”

Entertainment unions, however, have raised concerns that many entertainers will find themselves worse off under the proposals. Equity has described the move as “extremely concerning”, adding that it has always protected the right of its members to pay class one contributions so that they are in a better position to claim means-tested benefits and contribution-based Jobseekers’ Allowance when they are out of work. Though the new Universal Credit system is now in effect, Equity says that it is deeply worried members will face reduced entitlement and has yet to be convinced by HMRC’s assurances to the contrary.

HMRC has previously said that freelancers would end up paying less if they were liable for class two and four contributions, while the producers who hire them would have to pay nothing at all. But at Equity’s annual conference in May, general secretary Christine Payne said that she is still worried members will be “considerably worse off” if the plans pass into law.

Any change to the system would not come into force until the start of the new financial year next April, though the consultation is only open until August 6th. HMRC will seek to publish a summary of responses and a final draft of the legislation later in the year.

By Victoria McDonnell

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