Actors and other production workers' employment status in the media industry
Currently HMRC recognises as self-employed people who are ‘in business on their own account’. Will the new off-payroll working (IR35) rules inadvertently move the goalposts on employment status in a way that will have a particular impact on the media industry?
The rules for determining whether a contract for work is more like employment than self-employment are not changing, but the decision making responsibility and its administration are. The changes, which are already implemented for work in the public sector from April 2017 are being amended and extended to contracts for non-small clients in the private sector from April 2020. Many engagers will be using the Check Employment Status for tax (CEST) tool to decide whether or not the worker must be paid through a payroll, but this tool has certain deficiencies only some of which are easily corrected.
Currently HMRC recognise as self-employed people who are ‘in business on their own account’. This is a fairly nebulous concept but one which would include people who do a day here, a couple of weeks there, take a bit of time off and then a couple of weeks somewhere else. Many actors use an agent to arrange their business for them, and this is taken as being in business on one’s own account (with the talent agency sourcing the business). This is very common in the media sector, but is less so in other sectors.
This particular test is a difficult one for an engager to spot as they are unlikely to know all of a worker's circumstances. If this facility for using the ‘in business on one’s own account’ test gets lost there could be serious consequences for those affected:
- When the new OPW rules begin in April 2020, large and medium-sized engagers using CEST may find themselves directed to operate OPW rules for workers incorrectly. This will put them at a competitive disadvantage compared with smaller corporate engagers.
- Contracts thought to be of a self-employment nature will become contracts of employment, with additional employer’s National Insurance Contribution (NIC) costs for those engaging them.
- The artistes and everyone affected will lose the ability to claim expenses for travelling to wherever they need to do the work.
- Presenters and such like will lose the ability to deduct talent agency fees from their pre-tax income, unless they are entertainers within the meaning of s352, ITEPA 2003. Even these will be limited to 17½% of gross fee income, including VAT, which they will no longer be able to reclaim).
There are currently two special sets of rules agreed with HMRC, which are designed to help resolve status queries for the media industry.
The first apply to film and TV and deal only with ‘behind camera’ people. These date back to 2012 and can be found archived here.
The other set of rules apply to the radio industry. These have never been published by HMRC but can be found on the Radiocentre website. HMRC is in discussion with the industry about these. Although we understand they remain in force at the moment, it is possible that they will be withdrawn when the discussions are concluded.
Currently HMRC issues ‘Lorimer letters’ (after the key status case of Hall v Lorimer) to people in the industry that it is satisfied are self-employed – this facility is not available in any other industry.
There is a danger that this will be stopped and instead everyone will be encouraged to use CEST instead. As this doesn't currently take account of the number of clients and length of contracts at all, both key criteria in deciding whether someone is in business on his own account in this sector, it is likely to give a different answer. The obvious problem is that this is something the engagers will not know.
And the TV, broadcasting and film units are no longer authorised to make status decisions on behalf of HMRC.
A recent media case in the tax tribunal has foundered over this very issue (you can read the judgement here). Although this was decided on news presenters, the rationale for the judgment has implications right across the sector.
Clients, agencies and trade bodies need to be made aware of these changes