National Insurance Contributions (NICs) for Entertainers - All change! | Fieldfisher
Skip to main content

National Insurance Contributions (NICs) for Entertainers - All change!

Derek Hill
HMRC's consultation document proposing changes to the NIC system as applied to Entertainers was published on 15 May and can be accessed here.SUMMARY OF THE CONSULTATION DOCUMENTThe consultation HMRC's consultation document proposing changes to the NIC system as applied to Entertainers was published on 15 May and can be accessed here.


The consultation document broadly accepts that the current rules are no longer workable. 

HMRC's preferred solution in the consultation document is to repeal the special NIC rules which apply to entertainers so that self-employed entertainers are not deemed to be employees for NIC purposes.

This is VERY GOOD NEWS FOR FFW CLIENTS, who are the producers of content and higher end talent engaged through loan out companies.

It not such good news for entertainers at the lower-pay end of the industry who are interested in claiming benefits - broadly those entertainers would continue to qualify for universal credit (which is means tested) but may in many cases cease to qualify for job seeker's allowance (which is not means tested).

Some alternative solutions are considered in the consultation document.  FFW would say the only workable alternative is to create a special self-employed NIC category for entertainers, which would in principle enable job seeker's allowance to continue to be available to lower-paid entertainers.


The current situation is broadly awful.

The Entertainer NIC rules are applied differently by different players in the industry and they have been mis-interpreted by HMRC and the tax tribunals (in the ITV Services case) to bring high-end talent into the Class 1 NIC net when this was very clearly never the intention.  To make matters worse, the rules are very clearly being applied by HMRC (whether HMRC currently accepts this or not) differently to different taxpayers.  High-end talent engaged through loan out companies have been surprised to discover that their companies are being pursued for six year's worth of back-NIC (is anyone else being pursued for back-NIC?  We don't think so).  Producers have found that they must find an additional 13.8% NIC corridor on back end participations payable to talent in respect of productions funded and budgeted on the basis that class 1 NICs did not apply.  For some producers the money simply isn't there.

What on earth is going on?

Entertainers are currently in a special category for NIC.  Most entertainers will be technically self-employed for tax purposes.  But the NIC rules deem an entertainer to be employed if any part of the payment to that entertainer is "salary".   The ITV Services Upper Tribunal decision has the effect that virtually every payment to virtually ever entertainer will include an element of salary.  The decision has been appealed to the Court of Appeal, ETA of decision currently unknown (the last report from December 2012 was that the case was adjourned.)

The effect of deeming self-employed entertainers to be employed is that class 1 NICs must be paid in respect of the entertainers' earnings.  This creates an NIC liability for both the employer (the producer in this context) and the employee.  Where the entertainer is engaged through a loan out company, the NIC liability is (according to HMRC at least) transferred to the loan out company.  Equity are (or at least were, the last time we spoke to them) challenging this interpretation.

In contrast, there would be no Secondary Class 1 NIC liability for producers or loan out companies if entertainers were treated as self-employed - the 13.8% employer's contribution would fall away.  The self employed entertainer would still have an NIC liability (class 2/4) under the self-employed rules.

The application of Class 1 NICs to entertainers is good and bad, depending on whose perspective you take.  For FFW clients, it is entirely BAD.

It is BAD for producers/engagers, because the producer/engager is required to account for secondary NICs at the rate of 13.8% on all payments made to directly engaged entertainers (including back end participations).

It is BAD for more successful talent who engage with productions through a loan out company, because the secondary NIC liability passes to their loan out company.

It is GOOD for talent who operate at the lower end of the pay-scale because paying a given level of NICs entitles the entertainer to claim job-seekers allowance.


The consultation period runs to August 2013.  So any change of law will not take effect until some time in Autumn at the earliest, and may be deferred into next year.

The consultation document is proposing changes which will be made prospectively.  Some further clarity on what this means would be welcome.

It seems clear that all payments made in respect of productions which start after the change in law will fall within the new rules.  What about payments made in respect of productions which are already completed, or which are in progress when the change in law comes in?

It also seems clear that those producers and entertainers who are being pursued for back-NICs will remain, in HMRC's eyes, liable.  The consultation document will therefore be of somewhat cold comfort to them.


There has been a move among higher-end talent away from using loan out companies.  This is because the use of a loan out company essentially transfers NIC risk away from the producer and onto the loan out company.

Once the new rules are in place, the loan out company is likely to return to being the standard structure for engaging higher-end talent.