Changes to HMRC guidance on the way that performing work is taxed
There’s a new episode in the long-running saga of the tax for actors very own “Hundred Years War” – the endless negotiation between HMRC and Equity about how acting work should be taxed.
I wrote a short blog last year about how the longstanding confusion had worked out disastrously for some actors, dancers, musicians and SMs, whose earnings were misallocated from self-employment to employment through no fault of their own, and who found themselves excluded from government self-employment support as a result. Our appeal to HMRC about many of these is still going through.
One of the important parts of our argument in that appeal is that, blindingly obviously, HMRC’s guidance about this matter was inadequate and confusing. The guidance is called “ESM4121”, after its page reference in the HMRC guidance manual, and you can now read the much-improved update yourself if you search for that number. But the improvements were only made in September 2020, after several years of discussion between HMRC, Equity and accountants. We say that those years of delay were proof in themselves that the previous guidance was inadequate.
But how does the new guidance help, and what’s the position for the work you do in future?
There’s now a much more helpful summary clarifying that most actors and SMs will be self-employed most of the time, broadly speaking because their engagements tend to be short-term, overlapping, in different locations, given by different engagers, and often have periods of unemployment in between. The person has a professional presence or ‘shop-window, eg a Spotlight entry, an agent, a website or networking activity. For many of our clients, that describes them perfectly, so there’ll be no need to look any further than that.
HMRC include the clear words “Most actors and other performers are self-employed”. (There we are now chaps, that didn’t hurt, did it? You’ve only spent at least 30 years trying not to say that…)
Very clear examples are given of what the (unusual) employment (as opposed to self-employment) of an actor would look like – for example, a 2-year contract with one company for a dancer who doesn’t do any/much other work besides that.
So from now on, unless you are doing work which looks like what is in those examples, you should almost always be treating your work as self-employment for tax purposes, especially where the engager does not deduct tax and NIC from your earnings.
There are one or two common pitfalls which might make you think, mistakenly, that you should categorise earnings as employment even though you are not in the position described by the examples.
If you are on an Equity contract, say for a theatre show of a few weeks, or a short/medium TV engagement, you may look at the fact that holiday pay and pension benefit are included as a sign that this constitutes an employment contract (because that normally would be such a sign). In your case, it isn’t. Look past that to the more important factors described in ESM4121.
More confusingly still, some theatres and production companies will give you a weekly payslip. It may have their PAYE reference number on it, and it may even have an employment tax code on it, “NT” for example. The fact that a company may do this does not mean that this is an employment, even if the earnings turn up pre-populated in your online tax return when you come to compile it. The company are required by the Equity contract to give you a weekly notice of earnings. They are giving you a ‘payslip’ because it’s convenient for them – not because you are an employee.
We think the general situation will improve going forwards, as the message underlined by the rewritten ESM4121 slowly gets out there. But please be careful, and before you allow your tax return to submit with earnings in the employment section, satisfy yourself completely fully that they should be there. They probably should not.
If you have any problems or questions: call us for free advice on 08000 487626, message us on Instagram @accounting4actors or email firstname.lastname@example.org .
Please visit www.accounting4actors.co.uk and find out about tax for actors, accounting for creative and cultural industry professionals, actors’ tax returns, and all accounting for creatives.