HM Revenue and Customs Brief 35/13
Submit Articles Back to Articles
Issued: 18 November 2013
National Insurance Contributions (NICs): Repeal of the Social
Security (Categorisation of Earners) Regulations 1978 ('the
Regulations') in respect of entertainers from 6 April 2014
This Brief sets out HM Revenue & Customs (HMRC)
position in relation to the liability of entertainers to pay National
Insurance Contributions ('NICs') with effect from 6
April 2014 subject to the proposed changes in the
Regulations being approved by Parliament.
All national broadcasters, film companies, theatre managers,
independent production companies, their representative bodies and
agents in the Film & TV Production Industries, Equity,
individual entertainers, companies engaging entertainers, and any other
As a generality, entertainers (that is, those engaged as an
actor, singer, or musician, or in any similar performing capacity) are
engaged under self-employment terms and that their employment status,
for both tax and NICs purposes, applying relevant case law criteria, is
Since 1998 however, The Social Security (Categorisation of
Earners) Regulations 1978 (“the Regulations”) have deemed self-employed
entertainers, in certain prescribed circumstances, to be employed
earners for National Insurance purposes. The principal policy reason
for this was to provide entertainers, through the payment of Class 1
NICs, with access to earnings-related contributory benefit entitlement
when out of work.
In more recent years though, the manner in which entertainers
have been and are being engaged and paid for their work has made it
increasingly difficult for the Regulations to be applied and operated
as intended, causing uncertainties and fundamental, problems for both
entertainers and engagers in deciding whether Class 1 NICs should be
deducted and accounted for on payments made to and by them.
Following 18 months of extensive engagement with
representatives from all fields of the entertainment industry, HMRC
published on 15 May 2013 a public consultation document: 'National
Insurance and Self-Employed Entertainers', which discussed the precise
difficulties being caused by the current application of the
Regulations. The consultation presented four possible options for
simplifying the NICs treatment of entertainers going forwards.
The consultation ran for 12 weeks receiving 11,814 individual
responses of which 99.1% supported the option of repealing the Social
Security (Categorisation of Earners) Regulations in relation to the
entertainers. On 23 October 2013 HMRC published a summary of the
consultation responses which included the announcement of the
Government’s decision to repeal these Regulations insofar as they
relate to entertainers from 6 April 2014 and a first draft of the
legislation implementing this.
You can read the full consultation document and the summary of
consultation responses on the central Government website.
consultation on NICs and entertainers (Opens new window)
The current NICs position for entertainers until 5 April 2014
The Regulations as articulated in the Upper Tribunal and Court
of Appeal decision and judgement in the case of ITV Services Ltd v HMRC
continue to apply up to and including 5 April 2014.
The Regulations are applied to entertainers on an engagement
by engagement basis. This means each contract of engagement they enter
into is looked at separately for the purposes of deciding whether the
Regulations should apply to the payments to be made under its terms.
Where the Regulations currently apply to a particular contract
of an entertainer, the earnings derived from that contract are
presently subject to primary and secondary Class 1 NICs as defined in
Section 6 of the Social Security Contributions and Benefits Act 1992
('SSCBA 1992'). This includes any additional payments that derive from
that engagement such as royalties or residuals payments that may
continue to be paid to an entertainer for some time after their
original performance/ engagement has ended.
Under the current Regulations the primary Class 1 NICs
contributor is the entertainer, and the secondary contributor is the
producer of the entertainment from which the entertainer’s earnings are
derived. The secondary contributor (that is, the producer of the
entertainment) is liable to deduct and account for the primary Class 1
NICs from the entertainer at time of payment and to pay both these and
the secondary Class 1 NICs due to HMRC.
Further details of when the Regulations currently apply to an
entertainer's contract can be found in HMRC's published guidance for
entertainers, available on its website.
-Guidelines on the Specials NIC Rules for Entertainers (select from
on-screen guidance menu)
Revenue and Customs Brief 19/12
Revenue and Customs Brief 29/13
HMRC expects engagers of entertainers to continue following
this guidance and where the Regulations apply, operating primary and
secondary Class 1 NICs on payments to entertainers up to and including
5 April 2014.
The future NICs position for entertainers from 6 April 2014
Subject to the proposed changes being approved by Parliament,
from 6 April 2014, entertainers will no longer be included in the
provisions of the Regulations. This in turn means that entertainers'
earnings will no longer be brought within the ambit of Section 6 of
SSCBA 1992 (which places a Class 1 NICs charge on them) from this date.
Where there is no Class 1 NICs charge under SSCBA 1992, the
earnings will be self-employed earnings and subject to Class 2 NICs
(subject to the existing Class 2 Small Earnings Exemption rules) and
Class 4 NICs (subject to the existing the Class 4 Upper and Lower
Earnings Limit rules).
As the point at which Class 1 NICs is charged is the time of
payment (as opposed to the time of the engagement or the contract of
engagement being entered into), the practical effect of repealing the
Regulations for entertainers will be that from 6 April 2014 payments to
entertainers paid under a contract for services (that, is
self-employment) will be liable to Class 2 and Class 4 NICs under
section 11 (Class 2) and sections 15 to 18 (Class 4) of SSCBA 1992 and
subject to the existing Class 2 and Class 4 NICs rules.
The Regulations will not therefore apply to any payments made
to entertainers after 6 April 2014.
These payments will not attract a Class 1 NICs liability from
this date and will instead attract a Class 2 and (where applicable)
Class 4 NICs liability as detailed above. This includes payments made
to entertainers after 6 April 2014 but which derive from a contract for
services entered into before this date.
What happens next?
If you are an entertainer
From 6 April 2014, producers engaging your performance
services will not be required to deduct Class 1 NICs contributions from
any payments they make to you. This includes additional use payments
such as royalties. Your engager will make payments to you gross of tax
and NICs and you must declare these earnings as part of your normal
self-employed Self-Assessment return.
Please note that this guidance does not apply if
you are on an employment contract, and receive a regular salary from
your engager with tax and NICs deducted at source under the Pay As You
Earn (PAYE) system.
If you engage the services of entertainers
From 6 April 2014, you will not be required to operate Class 1
NICs for the entertainers you engage. If you are currently deducting
employees’ Class 1 NICs from the payments you make to your entertainers
(including additional use payments such as royalties), and paying the
respective employers’ Class 1 NICs on these payments, you should
continue to do so up until 5 April 2014. From 6 April 2014 however you
should cease to do this.
If you use an automated payroll system or an external payroll
provider service you will need to ensure your systems or payroll
arrangements are updated to ensure that Class 1 NICs continue to
operate on payments you make to entertainers up to 5 April 2014, and
cease to be operated from 6 April 2014.
If you provide advice to those in the entertainment industry
You should refer any parties you advise to the contents of
this Revenue and Customs brief and to HMRC’s other published guidance
on this issue as listed earlier in this brief.
Retrospective recovery of Class 1 NICs
Revenue and Customs Brief 29/13 (hyperlink above) explains
HMRC's position in respect of Class 1 NICs that are due for
entertainers in respect of all periods up to 5 April 2014.
HMRC now expects voluntary compliance with the Regulations as
detailed in Revenue and Customs brief 29/13 and therefore it does not
intend to undertake concerted compliance activity in the media sector
in respect of entertainers. 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.
HMRC will also continue to inspect those cases currently the subject of
Where HMRC is undertaking or undertakes an investigation into
an entertainer or media company, it will apply the law in terms of the
Regulations as they currently stand, applying the decision and
judgement of the Upper Tribunal and the Court of Appeal in the case of
ITV Services Ltd v HMRC for any relevant periods up to and including 5
HMRC will in due course publish separate guidance for
entertainers with National Insurance records that may have been
affected by this decision and judgement.
Under the terms of its Non-statutory clearance service to
businesses, should an engager have material uncertainty on the NICs
consequences of a particular contractual engagement with an
entertainer, if appropriate, HMRC can provide its view of how the law
applies to that contract.
Any such requests should be made by formal 'Non-statutory
clearance' application to Large Business Customer Relationship
Managers, Film & Production or TV Broadcasting Units as
appropriate enclosing details of the particular engagement and a copy
of the relevant (signed) contract.
About the Author
© Crown Copyright 2013.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2013-11-21 13:32:45 in Tax Articles