HMRC has this month published updated guidance intended to clarify the tax status of actors and other creative workers in the theatre industry, including stage managers, designers, directors and choreographers. The newly fleshed-out sections of HMRC’s Employment Status Manual seek to provide an increased degree of transparency – for the benefit of individuals and producers alike – as to how HMRC will examine an individual’s employment status in any given engagement for the purpose of determining their tax liabilities.

The guidance comes in response to perceptions that workers in the entertainment industry had been unfairly and disproportionately targeted by HMRC, with increased scrutiny and challenge over the tax status of performers and creatives over the last few years. With IR35 reforms looming (now due to be implemented within the private sector in April 2021), it is more important than ever that producers and individuals are able to accurately and confidently understand how the status of any particular role will be viewed by HMRC.

Although published at a time when the live entertainment industry collectively undergoes its most significant challenge in recent memory, this further insight will undoubtedly be appreciated by all corners of the theatre sector as producers progress plans to safely reopen and welcome cast, crew and creatives back into theatres at the earliest opportunity. The additional clarifications follow on from several years of discussions between leading industry figures and bodies (including Equity) and HMRC, and serve to uphold and reinforce the established view that the majority of performers are indeed self-employed for tax purposes. Where this is the case, payments by producers need not be subject to the various deductions and contributions that would otherwise be payable by an employer in the case of an employee, and that would serve to reduce the amount paid.

The sector-specific guidance includes the following illustrative factors (amongst others) as being indicative of self-employment for performers, designers, directors, choreographers and stage managers:

  • An itinerant pattern of work (e.g. multiple engagements within a year, multiple different engagers of that individual’s services and/or periods of unemployment between engagements);
  • The taking of steps, and incurring expense, to build and maintain their on-going business (e.g. use of an accountant, agent and/or casting directory, union membership, taking out insurance and actively pursuing research, training and networking opportunities within the theatre industry). The guidance emphasises that these steps will be considered cumulatively and the greater number of steps taken by an individual to develop their business in this manner, the more compelling the argument for self-employment will be;
  • A high degree of control for the individual over the output of their services. For performers, ‘control’ in this instance may be demonstrated by that performer’s overall responsibility as to the artistic interpretation of their role or by their ability to do preparatory work at a time and place of their choosing, rather than external factors, such as the duties of their role or the time or venue of a performance. HMRC usefully recognises that performers will often be unable to contribute to the content of a performance which is governed by a script or musical score, and that restriction won’t therefore preclude genuine self-employed status. For designers, directors and choreographers, who are hired for their creative skills, self-employed status may be demonstrated by the creative freedom afforded to those individuals to provide their services in the manner they consider most appropriate rather than at the direction of their engager (notwithstanding that in practice this will often be a collaborative effort among creative team members and indeed the producer itself);
  • The incurring of substantial costs in the hope of securing specific roles without any guarantee of additional work (e.g. in attending auditions or purchasing self-taping equipment); and
  • Providing one’s own significant equipment where fundamental to the role (which may be more particularly relevant for musicians and specialist artists such as magicians or circus performers).
  • In addition, whilst a right to send a substitute is usually a good indicator of genuine self-employment, HMRC notes that for many creatives (performers especially) this will not ordinarily be permissible. The absence of any power to substitute will not therefore rule out a finding of genuine self-employment.

Helpfully, HMRC expressly acknowledges its view that most performers are self-employed, but warns there remains a risk of employment in any engagement where these indicative factors cannot be adequately demonstrated. In addition, individuals may be an employee for a particular engagement, irrespective of whether they are generally treated as being self-employed.

While this new stage-specific guidance certainly helps to provide reassurance to those in the theatre industry who have long asserted their status – or the status of their workers – as self-employed, it must nonetheless be viewed in the round, considering other relevant factors including the length of an individual’s engagement under any given contract, as well as the terms of that contract itself. Producers and creatives should also be aware that this guidance is intended to apply only for assessing tax and national insurance contributions, and may not necessarily be applicable in the context of determining other employment rights (such as unfair dismissal or redundancy).