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Employed or self-employed

A new client (partnership) organises events, mainly themed childrens parties. The event will cost the customer, for example, £200. A booking fee is paid when the booking is made (£100) and this is paid directly to the partnership. The partnership then send an actor to the event to run the actual party and the customer pays the remaining fee (£100) direct to the actor which he/she retains as their fee.

The partnership arranges the event, calls the actor to give them the details, provides a script to follow at the event. The partnership uses three actors to host the events (though will increase this if demand grows) and events are alternated between them according to availability. When an actor is first used they are presented with a pack including all costumes etc required for the events.

Under normal badges of trade, indicators of employment are the fact that the actors are provided with equipment, given specific instructions as to how to perform their tasks and are expecting ongoing work (although this is totally dependent on bookings). Indicators of self-employment are, the fact that they can turn down events if they wish (in which case the partnership would need to contact one of the other actors, the actors themselves do not provide substitutes), they are paid a fixed fee regardless of how long the event is for, they do not get paid if there are no events.

As an additional point I believe that there are different rules for entertainers when determining employment status, compared to other categories of workers.

I would be extremely grateful any any readers able to offer :

(a) an indication of the likely employment status of the actors

(b) an indication of whether the different rules for entertainers would apply in this case.

(c) How those rules can be applied in this case to determine self-employment

(d) Any ideas, if employment is the likely status, of any changes that could be made to the arrangement to weight the status in favour of self-employment.

As as additional point the subject of VAT and turnover threshold is also a matter of concern. In the example above I would be interested to establish whether readers would consider the turnover for the event to be £100 only, or £200 (with a cost of £100). This makes a huge difference to the VAT position as the former is likely to see the business well below the VAT registration threshold, the latter will see it exceeded.

I would be most grateful for readers opinions on all or any of the above. Thank you.


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Different rules for tax and NIC

For their to be a contract of service, there has been held to be an irreducible minimum of factors to be present:

personal service - does the employee have the right to send (but not necessarily the obligation to provide) a substitute? No.control - over the where, when and  how. Present.mutuality of obligations. Not relevant to a series of one-off engagments.

The arrangement is, therefore, capable of being considered by a tribunal to be an employment.

Your facts are though proximate to, but not on all fours with, Sherburn Aero Club, in which it was decided that flying instructors engaged in an overarching contract to provide flying lessons, provided each lesson as a single engagement.

They used the club's aircraft, provided the lesson at a time and (take-off/landing) place prescribed by the club/the club's client, and provided the lesson in a manner prescribed by the CAA.  While they were in the air though, they were their own masters, and so were not subject to another master's control.  Accordingly they were held to be self-employed.  It's an FTT decision though, and so not binding.

That's just tax though.

For NIC purposes a person may be treated as employed under the 1978 Categorisation of Earners Regulations in these circumstances.

They say that "an entertainer" is an employee for NIC purposes unless their remuneration does not include payment of a salary; for services rendered, payable at a specific period or interval if there is more than one payment, and computed by reference to the amount of time for which the work has been performed.

If you need to treat them as employed for NIC purposes, then the only difference between treating them as employed or self-employed for tax purposes is one of timing and possibly deduction of expenses.

There do seem to be bases for treating them as self-employed for both tax and NIC purposes, but you are close to the margins.  Since you are representing the employer, your safest bet may be to take steps to ensure that it falls to be treated as employed, albeit that there will then be a Class 1 NIC cost.

Otherwise, I don't think that the more general principles applying to actors and other entertainers to determine their status apply.

Thanks (2)
12th Apr 2012 10:14

If it walks like a duck

and it quacks like a duck, then it's a duck.  This is self-employed and not even the pushiest Inspector would ever dream of saying otherwise.  Hell they're even paid by the end-punter.

The 'differentness' of entertainers to which you refer must be either the ruling in McCowan vs West (but that's about the nature of the equity contract), or the category called Reserved Schedule D status wherein a contractual relationship that would now be deemed PAYE is let continue as self-employed for those who've been in the business since before 1987.

For VAT it depends slightly on the wording of that booking fee.  If the whole thing is expressed as a bill of £200 and let's have £100 up-front and the balance to the actor on the day, then I'd say the turnover was £200.  But if it a £100 booking fee and they're told that there will be an invoice from the actor to them on the day for the remainder, then the turnover is £100.

Thanks (1)

I agree with Marion on the VAT

Sorry, I'd missed the VAT issue, but essentially agree with Marion.

If, as a matter of fact, the arrangement is that the initial £100 is a booking fee and the later £100 is a fee payable directly by the end client to the actor for their services, then tha taxable turnover is only £100 per event.  In that scenario, I too would consider them self-employed.

However, if the facts of the arrangement are that the fee for the event is £200, payable as to £100 on booking and £100 on delivery, which the actor collects on the partnership's behalf and then deducts their fee from, then the taxable turnover is £200.  That is the context I was assuming in my previous post on the employed v self-employed issue.

Whose loss is it if the end client can't/won't pay?

Thanks (1)
12th Apr 2012 17:37

Thank you for these replies, much appreciated. Just to clarify, the actor collects his fee on the day of the event. Everything he collects is his to keep, including any tips he may receive. The partnership gets no element of his fee whatsoever. The only fee they actually receive is the booking fee. Therefore, one would presume, although I haven't confirmed this, that if the end client refuses to pay, the loss is strictly the actor's. 

Thanks (0)
12th Apr 2012 20:03

Read the contracts

You have to start from what is written down.

Thanks (0)
16th Apr 2012 11:26

Actor's Treatment of NI

Assuming the actor is self employed, how does he treat the NI deduction in his own SA.  Does he show his income as the full £100 paid to him, or net of the NI deduction ?

Thanks (0)

It's the full amount

He will need to be taxed on the £100, although it isn't then liable to Class 4 NIC.  You adjust your profits for Class 4 NIC purposes in Box 101 of the full self-employment pages.

Thanks (0)
16th Apr 2012 12:29


I don't think the actor will be having any Class 1 deducted from a fee paid to them by the punter, so it will just get chucked in the heap with the rest of his non-NI'd self-employed income.  For Class 2/4 purposes an actor is chargeable on their self-employed profits minus those fees on which Class 1 has (or would have) been taken.  This can produce some very anomalous circs.  Just not in this case.

Thanks (0)
16th Apr 2012 14:39


That's very helpful.  I do have someone in that very position, so will ensure there's no "double charge" for NI.

Thanks (0)