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Actors beware! HMRC is on the warpath…

Actors beware! HMRC is on the warpath…

It seems that HMRC have found a rich new source of targets for IR35. One that has been, rather surprisingly, untapped since IR35 was first brought in but which, on the face of it, is  probably more of a target than the traditional IT contractors and engineers. And one that further illustrates the problems with using “in business” as a criterion for investigation.

It is being reported in The Stage that several “high profile” performers who work through their own limited companies have had nice letters from HMRC pointing out that they may owe many thousands in NICs, going back six years. This, needless to say, is causing some consternation among the luvvies.

Now this is interesting, to say the least. When IR35 appeared the fledgling PCG thought that the media people would be obvious targets in their own right; after all, they are supplied via agencies, and they are under the direction of their clients (literally, in many cases). And, of course, they have a much higher public presence and would have given the campaign against IR35 a serious boost.

Sadly the answer that came back was “it doesn’t apply to us”. End of discussion.

Now, however, HMRC seem to believe it does apply to them. Why now is a whole other question, but The Stage reports HMRC as saying that it “is not cracking down on actors or any other profession”.  Really?  Perhaps HMRC have only just noticed that actors exist; after all, such frivolities as the theatre and Television are not something you would normally associate with the average tax inspector. Still, not a crackdown then, more of a refocusing exercise then… Or something,

Similarly a prominent accountant is claiming that HMRC are moving the goal posts and reinterpreting existing legislation. Echoes of the Arctic case, where S660a was imaginatively applied to a situation it was never meant to cover (and, of course, S660a itself came into being as the result of an actor’s activities…). Except this time they’re not moving any goalposts, actually.  It has long been a mystery why actors, freelance journalists and assorted meeja people have escaped the predations of IR35 despite many blatant examples of them having what look like full time employments, to the extent they have claimed for unfair dismissal when those employments have ended.

So what has changed then? Clearly someone has removed a previous barrier for some reason. Perhaps it’s a pre-emptive strike to offset all those PCG members stepping away from IR35 altogether.

However, the point at issue here is what actually constitutes being in business, which HMG insist is the key separator for IR35 fodder. Is an actor in business? Apparently not, if you accept that actors are somewhat unlikely to grow and take on employees and capital assets. However, they have to bid for work against other similarly qualified people, they work through agencies, they don’t get paid if the play is cancelled and they can send in a substitute (except they call them either stand-ins or understudies).

There are also solid business reasons for working through a company. Like other contractors, they have to cover periods when they have no income, they have to cover expenses, they have to accumulate pension funds and insure themselves for illness. Just like all us other contractors, in fact.

So really the surprise is not that actors and the like are now IR35 targets, but that it’s taken so long for anyone to realise it. Still, there are 36,000 Equity members out there. That would be a nice addition to PCG’s membership…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Milton Friedman, Chicago Style by DonkeyHotey

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