Tax and Performers – what can you claim?

Most people don’t like doing accounts and actors, singers, musicians, dancers and performers are no exception.

Making Tax Digital will mean they will need to be on top of their expenses in order to do quarterly returns from April 2018.

Here is quick summary of claimable expenses.

Section 352 Limited deduction for agency fees paid by entertainers

(1) A deduction is allowed from earnings from an employment as an entertainer for agency fees (and any value added tax on them) if the fees are calculated as a percentage of the whole or part of the earnings from the employment.

This is subject to the limit in subsection (2).

(2) Amounts may be deducted under this section in calculating the net taxable earnings from an employment in a tax year only to the extent that, in aggregate, they do not exceed 17.5% of the taxable earnings from the employment in the tax year.

(3) Subsections (4) and (5) apply for the purposes of this section.

(4) “Entertainer” means an actor, dancer, musician, singer or theatrical artist.

(5) “Agency fees”, in relation to an employment, means—

(a) fees paid under a contract between the employee and another person, to whom the fees are paid, who—

(i) agrees under the contract to act as an agent of the employee in connection with the employment, and

(ii) at the time the fees are paid is carrying on an employment agency with a view to profit, and

(b) fees paid under an arrangement under which a co-operative society or the members of such a society agree to act as the employee’s agent in connection with the employment.

(6) For the purposes of subsection (5)—

“co-operative society” does not include a society which carries on or intends to carry on business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with or lent to the society or any other person, and

“employment agency” has the meaning given by section 13(2) of the Employment Agencies Act 1973 (c. 35).

http://www.legislation.gov.uk/ukpga/2003/1/section/352

Trade and Magazine Subscriptions

You can claim for:

trade or professional journals
trade body or professional organisation membership

Travel & Subsistence

The normal rules apply https://stevejbicknell.com/2017/03/27/what-are-the-rules-on-subsistance-and-travel/

Travel to auditions, rehearsals and performance related activities should all be claimable.

Car Mileage can also be claimed at 45p for the first 10,000 miles then 25p per mile

Clothing and Costume Cleaning

If the clothing is for a performance then it should be fine but if used for personal use it has duality of purpose and can’t be claimed.

Generally rehearsal clothes can’t be claimed.

If the clothing counts as for a performance then the cleaning costs can be claimed

Other things

Tickets to events, shows, movies and museums may be claimable if they are for research purposes.

Props and equipment, even Ipads and computers could also be business expenses.

Websites, marketing, photography can all be business expenses.

Working form Home can also be claimed https://stevejbicknell.com/2015/02/02/simplified-expenses-working-from-home/

Also Mobile phones, stationery, insurance, accountancy and many more

steve@bicknells.net

Are Cruise Ship Entertainers Employees?

If they weren’t on cruise ships HMRC would probably argue that they were employees but in the case of cruise ships they argue the opposite.

Pete Matthews (1) Keith Sidwick (2) v Revenue & Customs [2011] UKFTT 24 (TC)

Mr Sidwick was a musician and played piano on a series of cruise ships. Mr Matthews was a juggler, similarly entertaining passengers on cruise ships. Both were subject to a close degree of control by the ships officers but the First-tier Tribunal found that this degree of control was required by the context of a cruise ship.

The First-tier Tribunal concluded that the entertainers were not employees ‘…but earn their living by entering into a series of separate engagements with a number of different cruise lines in a similar way to actors…’

The reason why HMRC argued against employment was to stop a claim for Seafarers Earnings Deductions.

To get the deduction you must:

work on a ship. Oil rigs and other offshore installations aren’t ships for the purposes of Seafarers’ Earnings Deduction – but cargo vessels, tankers, cruise liners and passenger vessels are
work all or part of the time outside the UK. This means that for each employment you must carry out duties on at least one voyage per year that begins or ends at a foreign port
be resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK) – find out more by following the link ‘Check your residence status’ in the section below

You get the deduction from your earnings as a seafarer if you have an ‘eligible period’ of at least 365 days that consists mainly of days when you are absent from the UK.

From 6 April 2013 the rules that determine if someone is resident in the UK for tax purposes have been put on a statutory basis. These rules are known as the Statutory Residence Test (SRT).

steve@bicknells.net

No more Class 1NI for Self Employed Entertainers

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.

From 6 April 2014, producers engaging entertainment 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. The engager will make payments to the entertainer gross of tax and NICs and the entertainer must declare these earnings as part of their normal self-employed Self-Assessment return.

Please note that this guidance does not apply if you are an entertainer 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.

The changes will be of interest to 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.

See HMRC Brief 35/13 for more details

steve@bicknells.net

HMRC reconsider the NI status of self employed entertainers

On the 15th May HMRC issued a consultation document ‘National Insurance and Self-employed Entertainers‘ comments are invited until 6th August 2013. The object of the consultation is to simplify National Insurance for Entertainers and for the recommendations to be rolled out from 6th April 2014.

The consultation is relevant to:

Actors
Singers
Musicians
Performers

Its not relevant to individual employed under a ‘contract of service’ as they are employed.

Since 1998 self employed entertainers have been deemed to be employed earners for National Insurance purposes in order that they could access earnings related contributory benefits. This requires contributions from the entertainer and secondary contributions from the producer of the entertainment.

But its complicated because entertainers often receive ‘additional use payments’ such as royalties, the payments can be complex and paid years after the original engagement.

In addition there is evidence that the 13.8% employers NI has made some producers look outside of the UK for entertainers.

Some amendments to the rules were made in 2003 replacing the ‘wholly or mainly by way of salary’ with a revised definition of ‘salary’

“Salary“means payments:

(a) made for services rendered;

(b) paid under a contract for services;

(c) where there is more than one payment, payable at a specific period or interval;

and

(d) computed by reference to the amount of time for which work has been performed.

But this hasn’t help, computed by reference to time is too broad and entertainers don’t work on this basis.

So far HMRC have sought the views of groups representing 80,000 entertainers and 23,000 engagers.

Currently there are two options within the Class 1 regime for amending legislation which HMRC believe would simplify the NICs treatment of entertainers’ earnings:

Option 1: Provide for separate secondary contributors for NICs due on Initial Performance Payments (IPPs) and NICs due on Additional Use Payments (AUPs);

or

Option 2: Provide that IPPs are subject to Class 1 NICs, but AUPs are subject to Class 4 NICs

Alternatively all of the entertainers earnings could be moved into class 2 and class 4 NI.

Do you have any suggestions for HMRC?

steve@bicknells.net