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HM Revenue and Customs Brief 10/11


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Issued: 02 March 2011

National Insurance: ITV Services Ltd (‘ITV’) and The Commissioners for HM Revenue & Customs (‘HMRC’) First Tier Tribunal -Tax Chamber decision of 23 November 2010. (TC/2009/10166)

This Brief outlines the salient facts and the National Insurance implications of the above decision for the entertainment industry. You can read the full text of the decision on the Tax Tribunals Service website (Opens new window).

This case concerned the employment status for National Insurance contributions purposes of actors engaged by ITV under a variety of contract types. The legislation in point is the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689) [the 'Entertainers Regulations' as amended in 2003.]

The Tribunal judges found that except for the ITV 'All Rights Agreement', in all other contracts, including contracts for walk-ons, the actor’s remuneration included 'any payment by way of salary' as defined in the Entertainers Regulations. As such their contracts provide for remuneration which does include salary and there was a liability for Class 1 National Insurance contributions on all the remuneration payable under the contract.

The tribunal’s decision confirms the HMRC technical view and Policy intention stated by Ministers at the time the regulations were first laid in 1998, that the majority of entertainers in the TV, film and theatre industries, engaged on Equity contracts, are to be treated as employed earners for National Insurance contributions purposes. The implications of the decision are that only actors who have entered into 'All Rights Agreements' or are engaged for a specific production, programme or episode that does not involve payment to provide their services as and when required for a specified period of engagement will be excepted from the Entertainers Regulations.

Consequently, the Entertainers Regulations will also now apply to the minority of actors who had previously entered into Equity contracts on the common understanding that, as the production was dependent on them for box office success, they would remain outside of the ambit of the legislation. The tribunal has decided that there is an element of salary in the payments made under such contracts and confirmed that the essential quality of salary was to 'purchase the individual’s time for some definite or indefinite period, short or long, rather than to pay for specific services'. The wider implication of this decision is that this test should be applied to contracts for all actors whatever their status within the profession and parties cannot contract out of the liability for Class 1 National Insurance Contributions if the nature of the contract is that it includes payment 'by way of salary.'

In the light of the First Tier Tax Tribunal decision there is a liability for Class 1 National Insurance contributions for all actors on existing Equity contracts. HMRC is also obliged to apply the law immediately to all Equity contracts that are either newly entered into, revised, renewed or extended from the date of this briefing and from 6 April 2011 in respect of all current Equity contracts that continue beyond the end of the 2010/11 tax year, which are of a type that has been previously accepted by HMRC as falling outside of the regulations. This means that engagers have until 5 April 2011to make the necessary administrative arrangements to ensure that they start to pay Class 1 National Insurance contributions in respect of these existing contracts that now fall within the regulations as well as such contracts that might be agreed in the future.

HMRC’s current published guidance on the National Insurance contributions liability for entertainers in the Employment Status Manual (ESM 4145 to 4147) and the document 'Guidelines on the Special National Insurance contributions Rules for Entertainers' published in April 2005 on the HMRC website will be amended in due course to reflect this judgment.

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Article Published/Sorted/Amended on Scopulus 2011-03-06 18:10:12 in Tax Articles

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