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TV Production royalties NI or no NI

Current TV producer working now received historic royalties for past productions

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Good afternoon, 

 This is not our usual client, so looking for a second opinion. 

 Our client has his own TV production company and receives income from salary, and is looking to pay himself a Royalty in addition from past productions.

I have researched and I believe as he is a current working producer, the royalty should be classed as income rather than "other income" on the tax return, thus attracting NI. When I queried with the NI help desk, they escalated the query to a senior, who stated it should go in the other section and not attract NI. As the royalty is in the region of 70,000 this potentially accounts for 4045.00 missing NI, and I would not want the client to happily take this advise for a number of years, only to then get hit with a very large NI bill in the future.

Help gratefully received.

Replies (4)

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By CJaneH
11th Mar 2022 14:32

A question as I am no lawyer. I assume the production company ( a ltd Co) is paid Royalty for repeats on TV channels and the Company owns the copyright. Is the payment to the director/shareholder from the production company actually royalty.

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Replying to CJaneH:
By jonharris999
13th Mar 2022 07:32

@CJaneH poses a good question. Is there a contract between him and the Ltd conferring a right to receive royalties for this particular property? If so, I agree with the HMRC advice. If not, this is a dividend (with all the other implications of that).

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Replying to jonharris999:
By More unearned luck
15th Mar 2022 00:05

Just because a company pays money to a shareholder it doesn't make that payment a dividend.

If the company mistakenly thinks that the ownership of the copyright of its works resides with the director/shareholder when itself is the owner then it is entitled to its money back when the mistake is realised. If follows that it can't be income of any description of the director/shareholder, for example it can't be a dividend. Of course it could be many years before the mistake is discovered.

The company probably has a duty to deduct tax from correctly paid royalties and best does so from payments it thinks are royalties.

Usually clients want to do the opposite viz: transfer their intellectual property to a company in the hope that the income will be taxed at CT rates. But there are ante avoidance measures to stop such planning.

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Replying to More unearned luck:
By Tax Dragon
15th Mar 2022 02:48

If ownership resides with the director, why is the company receiving the money in the first place? (Possibly the same question as CJaneH had, asked from the opposite direction.)

Btw, there are anti transfer of income rules (if that's what you were referring to) in the CT code too, eg s752 CTA 2010.

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