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TaxationWeb by Peter Arrowsmith, FCA

A National Insurance tip for actors and their advisers, by Peter Arrowsmith, FCA, of National Insurance ConsultancySome actors should now be making NIC refund claims for the last five years.

New regulations in respect of entertainers came into effect from 6th April 2003. The Inland Revenue’s intention in changing the regulations was to ensure that most entertainers fall within their requirements. Since the original regulations were introduced in 1998, it has become common practice in the film industry, and to a lesser extent in the TV industry too, for actors to receive pre-purchase payments – in lieu of future repeat fees/rights and royalties – as part of their remuneration package. The pre-purchase payments are usually the most significant element of the package. This therefore had the effect of taking actors out of Class 1 liability based on the pre-April 2003 legislation, provided that they were genuinely self-employed on basic common law principles.

Having changed the regulations to suit their needs, the Revenue has announced that affected actors and their engagers can now claim refunds of Class 1 NIC for the period from 17th July 1998 to 5th April 2003. Claims for all years should be submitted together.

Claim forms can be obtained from National Insurance Contributions Office, Refunds Group (Erroneous 4), Room BP1001, Benton Park View, Newcastle upon Tyne NE98 1ZZ, telephone 08459 154042.

Claims from secondary contributors will be processed first. Actors themselves can choose not to reclaim their own share of Class 1 contributions (primary contributions) so that their entitlement to contribution based jobseekers allowance is not prejudiced. Otherwise refunds will have the appropriate Class 2 and Class 4 withheld, as well as any contribution based jobseekers allowance already paid that was based on payment of the Class 1 contributions in question.

Further details can be found in a document on the Inland Revenue’s website (http://www.inlandrevenue.gov.uk/pdfs/nicrules_ents.pdf). This is similar to, but very slightly more detailed than, an article in the June 2003 Tax Bulletin.