Share this content

SCH D OR SCH E?

SCH D OR SCH E?

Didn't find your answer?

Have a new client who is "engaged" by a local Theatre trust - receives income without deduction of tax (code NTW1 applied) but NIC is deducted. Contracts are all short term and end when individual productions end. I have seen a sample contract and it smacks of employee relationship - but all such "workers" regard themselves as freelance and nomadic. Arrangements for not deducting tax apparently "approved" by HMRC. Obviously want to claim a sch D deduction for "business" expenses - but is the lack of any tax deduction by the Theatre enough to justify this?
Tony Turner

Replies (4)

Please login or register to join the discussion.

avatar
By tonyturner
27th Jan 2007 17:40

thanks
really useful you two

Thanks (0)
avatar
By Paula Sparrow
27th Jan 2007 14:58

Found it.
These are really useful if you have clients in this line of work. Unfortunately
http://www.hmrc.gov.uk/specialist/fi_guidance_notes2003.pdf

Thanks (0)
avatar
By Paula Sparrow
26th Jan 2007 20:03

Check the TV & film status rules
There is a long list of jobs within the TV and Film industry (which I cannot immediately lay my hand on), which determines whether the particular activity is to be treated as employed or self employed. It's probably worth looking at that, even though your client is not directly within that industry, as a starting point to decide on your client's status.

The NTW1 code and Class 1 NIC deduction would seem to imply that he's self employed for tax and employed for NI; however, there is also a special rule for the industry which allows them to automatically apply NT even where the worker is an employee, just for administrative ease (see para 2.3 of the booklet reference the "seven day rule").

What is it about the contract which smacks of employee relationship?

I am assuming that he is not operating through a Limited company, so at present it is not his problem, anyway. Whether he is employed or self employed, he will still need to pay tax on the earnings through Self Assessment, and the payer will be the one liable to pick up the tab if their treatment is wrong.

Thanks (0)
avatar
By Chaztax
26th Jan 2007 13:51

Appears promising
A lack of PAYE tax deductions does not in itself prove that a person is self- employed. HMRC may use an NT code, for example, where a person self – assesses on trading or other non – PAYE income and holds a PAYE post as a small part of their main work. (See www.hmrc.gov.uk/manuals/pommanual/pomcod/pomcod02102.htm.)

However, there seems to be a fairly good chance that your client is indeed self – employed. HMRC manuals ESM 4121 explains that actors/performers who carry out a series of short term assignments are normally self- employed under normal employment status indicators. For example, they are normally independent, on a long term approach, from a particular regular paymaster.

The manual also explains that the worker’s contract may include favourable terms such as holiday pay which have been negotiated by the performers’ unions and that this may, slightly misleadingly, give the impression of employment. This explains your view of the sample contract.

As employment status is a complex area, you obviously need to read the above extract and check everything carefully.

The NIC position would need to be considered separately.

Finally a pedantic point: the terms Schedule D (for individuals) and Schedule E have now been abolished – such income can be referred to now simply as trading income and employment income respectively.

Hope this helps

Thanks (0)
Share this content