FTT ruling shines spotlight on actor’s NICs via intermediary company

A First Tier Tribunal (FTT) has found that well-known actor Robert Glenister was within the National Insurance Contribution (NIC) intermediary rules when he was paid via a personal services company (PSC), in a ruling which may have implications for a number of other self-employed entertainers

The case involved Big Bad Wolff Ltd, which was the PSC of Glenister and his wife. [Big Bad Wolff Ltd and the Commissioners for Her Majesty’s Revenue & Customs [2017] UKFTT 0729 TC06143].

The tribunal heard Glenister provided his services directly to end clients (producers) through the company until 2011, when he began to provide his services directly. The actor, known for his roles in Hustle and Spooks was a director of the PSC and received employment income and dividends in respect of his acting services.

It was agreed that, if Glenister had provided his services directly to clients, the contract would have been, as a matter of general law, a contract for services, and also that, if the contracts had provided for the payment of salary, he would have been treated by the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689) (the categorisation regulations) as being employed for NIC purposes.

The appeal was against a decision that the PSC, and therefore the actor, was liable to pay primary and secondary Class 1 NICs in respect of his earnings.

The actor’s lawyer argued that the categorisation regulations were intended to confirm benefit entitlements derived from the making of class 1 NIC contributions on those who would not otherwise be entitled to make those contributions because the factual circumstances placed them in the wrong category to do so. As such, they were ‘beneficent’ and were not an anti-avoidance measure, since they allowed actors who would otherwise be self-employed to obtain benefits while they were ‘resting’ between acting engagements.

The effect of the regulations was that a self-employed actor would be categorised for the purposes of NIC as an employed earner unless he fell within the exceptions provided by paragraph 5A Schedule 1 Part 1 Column B; but an actor who was employed would not fall within the categorisation regulations at all because of the specific exclusion for those in employment in paragraph 5A.

As a director of the appellant in receipt of a salary, Glenister was, according to this argument, employed in an office with general earnings. It followed, therefore, that the categorisation regulations could not apply to him. All his earnings as an actor passed through the PSC which had accounted for primary and secondary NIC on all of Glenister’s earnings.

In its analysis, the FTT considered that the clear intention of Parliament was to prevent the avoidance of NICs by the introduction of an intermediary. In this case, Glenister would have been self-employed under general law but was treated as an employed earner under reg. 2(2) of the Categorisation Regulations, hence his use of an intermediary was intended to reduce liability to NICs. The FTT considered that it was necessary to assume a hypothetical direct relationship between Glenister and the client (as provided for by s. 4A(1)(c) and reg. 6(1)(c)) in construing para. 5A, hence the existence of the PSC, and remuneration received from the PSC, had to be ignored, and the exception for employment in an office with general earnings did not apply.

Finally, the FTT was unable to accept the legal argument that the word ‘regarded’ in s. 4A(1)(c) and reg. 6(1)(c) (‘the worker would be regarded for the purposes of [ ] as employed in employed earner’s employment’) was wide enough to included deemed treatment under the categorisation regulations.

Accordingly, the FTT concluded that Glenister was in employed earner’s employment.

Stephanie Webber, a specialist tax write at Croner-i said: ‘It is understood that this appeal was a test case and there are a number of other appeals concerning members of the acting profession awaiting the outcome. It deals only with the construction of the SSCBA 1992, s. 4A and application of the intermediaries and categorisation regulations, and matters relating to the amount of the liability that were also in dispute may be the subject of a separate appeal.’

Big Bad Wolff Ltd and the Commissioners for Her Majesty’s Revenue & Customs [2017] UKFTT 0729 TC06143 is here.

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