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HM Revenue and Customs Brief 35/13


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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 interested parties.


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 self-employment.

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.

Public consultation

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.

HMRC 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.

Entertainers -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 investigation.

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 April 2014.

HMRC will in due course publish separate guidance for entertainers with National Insurance records that may have been affected by this decision and judgement.

Further information

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.

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© Crown Copyright 2013.

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Article Published/Sorted/Amended on Scopulus 2013-11-21 13:32:45 in Tax Articles

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