IR35 Guides - Are you inside or outside IR35?

An entertainment industry newspaper has reported that a number of leading actors who work via their own personal service companies have received backdated national insurance demands as the HMRC applies IR35 to the performance industry.

The article in The Stage yesterday, "tax scare for actors", says that a number of well-known actors have received letters from HMRC claiming that large sums of NICs are owed.

The actors involved work via their own limited companies, and provide their services on a contract basis to employers within the entertainment industry.

Anthony Pins, a partner with Nyman Libson Paul, told the paper that HMRC appeared to be using the IR35 rules to target entertainers, something they had not done until now.

The accountant suggested that HMRC are attempting to reinterpret existing legislation in order to raise extra tax revenue, something the tax authorities deny as the legislation in question has been in place for many years.

ITV Services Ltd case

Last year, HMRC won a tax tribunal against ITV in which it was deemed that actors in its drama series were 'employees' for tax purposes, with the exception of actors hired for single performances in specific programmes. ITV were found to be liable to pay employers' NICs on its actors' earnings (see HMRC Brief 10/11)

According to the HMRC brief, 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' which governs how actors are remunerated.

If individuals are found to have operated via their own limited companies purely for tax purposes, whilst continuing to have the same working practices as 'normal employees', HMRC could potentially claim for back taxes for many years, as well as penalties, under the IR35 rules.