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 ACTORS' EQUITY CONTRACTS MEAN CLASS 1 CONTRIBUTIONS

HMRC say the First-tier Tribunal's decision in ITV Services Ltd (TC836) confirms the technical view and policy intention stated by ministers at the time regulations were first laid in 1998: that most entertainers engaged on Equity contracts are to be treated as employed earners for National Insurance contributions purposes.

As a result of the ruling, the Revenue say the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689) also apply to actors who had previously entered into Equity contracts on the understanding that, as the production was dependent on them for box office success, they would remain outside of the ambit of the legislation.

The tribunal decided that there was an element of salary in the payments made under such contracts and confirmed that the essential quality of salary was to 'purchase the individual's time for some definite or indefinite period, short or long, rather than to pay for specific services'.

The taxman says the test should be applied to contracts for all actors, whatever their status within their trade, and parties cannot contract out of the liability for Class 1 National Insurance if the nature of the contract is that it includes payment 'by way of salary.'

HMRC will apply the law immediately to all Equity contracts that are either newly entered into, revised, renewed or extended from the date of Revenue & Customs Brief 10/11.

It will be applied from 6 April in respect of all current Equity contracts that continue beyond the end of the 2010/11 tax year, which the department would previously have accepted as falling outside the regulations.

Employers therefore have until 5 April to make the necessary administrative arrangements to ensure they start to pay Class 1 National Insurance contributions in respect of existing contracts that now fall within the regulations, as well as such contracts that might be agreed in the future.

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