Most people assume working in TV is all glitz and glamour. However, the unsociable hours and the measly pay for those starting out might make you think again. Furthermore, if you are a member of the production crew, all your hard work and efforts are justified by a tiny credit that rolls past – if the viewer bothers to hang around for that – while the acting stars take all the plaudits. However, for me, that is not the worst of it. As you might expect, it is the tax situation that seems most unfair.
For those at the lower rungs of the production crews, they are in the unusual position of being treated like a freelancer while being taxed as an employee. This is all set out in HMRC guidance on the entertainment industry, where they list the types of roles and where that position would be accepted as self-employment. For example, a make-up artist is treated as self-employed so long as “the contract requires the provision of a standard make-up kit or the majority of the work of the work is not carried out on the engager’s premises.”
An aside here. HMRC’s guidance is not the law. HMRC enforces the tax collection as set down in law by various governments. It is their remit to collect as much tax as legally possible. However, the problem with some law is it can be subjective and open to interpretation. HMRC’s interpretation of a grey area will likely result in more tax being payable, the taxpayer’s (or their advisors’) interpretation is more likely to reduce their tax bill. However, if you disagree with HMRC there are limited channels to persuade them/prove they are wrong, most of which are expensive. It is for this reason that most businesses, including production companies, will accept HMRC’s interpretation as it saves them the headache of the dispute.
And here is where I get frustrated. The old guidance from HMRC stated that most lower-level roles (e.g. assistants, secretaries, runners) should be treated as employees unless their guidance explicitly stated otherwise. I do not understand this disparity – why is it that a lower-level worker is treated as an employee but the higher-level can be self-employed? They both have the same short-term contract, are told what to do by the producers and once they are done, they have to find another job.
Even worse, people in nearly identical roles could be treated differently. Take the make-up artist that supplies their own kit, they would be self-employed, but another make-up artist on the same shoot that turns up without any kit would be an employee. They are supplying the same services, have the same responsibility and will be subject to the same level of control from the producers, but have different employment statuses. And they probably get paid the same basic rate, with the kit-owning artist add a fee for the use of this kit.
I am not entirely sure why this exists. My assumption is that it is to protect the more junior production staff from unscrupulous bosses, who, without any employment law around, might pay the staff less than minimum wage. (That said, I wonder how many runners who get paid minimum wage do more than their contracted hours anyway, especially as you need to be seen to work hard to get ahead.) Employment status also entitles the employee to stuff like holiday pay and sick pay. This is all well and good, but for short term contracts does not add up to much. Also, employment status is pretty meaningless for short-term contracts, so if you had a persistent or serious illness, the production is likely to terminate the contract without any ramification. After-all, an employee will typically only have some sort of job security after two years continual employment.
Why this really matters is the difference in tax treatment between self-employed and employed people. For starters, there is a big difference between the deductions an employee can make versus someone who is self-employed.
The law is subtly different:
- for someone who is self-employed, the expense is allowable if it is wholly and exclusively incurred for the purpose of the trade.
- for someone who is employed, the expense is allowable if it is wholly, exclusively and necessarily incurred in the performance of the duties of the employment
The best way to illustrate this difference is with an example. Take our two make-up artists above – one with the kit (self-employed) and one without (employed). Say they both decide that getting a subscription to a fashion magazine would be great for work as it would provide inspiration for make-up trends and designs (assume they would not have taken the subscription personally regardless of their work). While the self-employed make-up artist can make a deduction for this subscription, the employed make-up artist cannot, as it is not necessary.
Another major difference is the treatment of travel expenses. Employees are explicitly prohibited from claiming “ordinary commuting” costs, which is the travel between “the employee’s home and a permanent workplace”. In HMRC’s opinion, a permanent workplace is where the employer is based, so the production office/studio. Self-employed people will typically have a base at home where they perform their admin – invoicing, bookkeeping, emails etc. – so their home is their permanent place of work. They can therefore claim for any travel costs to and from their home to the production/studio.
Back to our example. The two make-up artists both live in Leeds but get offered a role on the same production in Manchester. The self-employed make-up artist can claim for the mileage between the two cities but the employed one cannot. Indeed, if the self-employed artist decided to stay over in hotel during the week to make it less stressful, they could claim this too (this is not necessary, but is only being incurred for the business, so is fine). The employee cannot. Over the course of a three month shoot this can add up to a lot of money. Furthermore, this is not like a “normal” permanent job, where you consider the options and suitability of a job in a different city, with the potential to relocate – in film and TV you go where the work is and where the best credit is, no matter how inconvenient the travel.
So, the employed production worker is already out of pocket as they cannot reduce their taxable income by deducting as many expenses, but to make matters worse, they are charged more tax too. The self-employed worker is charged National Insurance under Class 4 at 9% on their taxable income, while the employed worker is charged National Insurance under Class 1 at 12%. Furthermore, the employer is required to pay National Insurance themselves at 13.8% on any employees’ wages, so the overall cost to them of employing someone is greater than engaging a self-employed person. This might have the effect of reducing the fee they are willing to pay the employed workers.
On top of this, the employer is now legally required to offer a pension to employees, costing a further 3%. Like the holiday pay and sick pay, while this might seem like a benefit of obtaining employee status, once you have worked for a dozen different employers and received a pension pot with each of them, it quickly becomes an administrative headache. It’d be much better to be self-employed, charge a little more to the production company and set this aside personally.
Finally, the self-employed worker has the option, if it is suitable, to work through a company. This might have tax savings too, although there are other considerations which I have discussed in previous articles.
Of course, I should say that each engagement should be judged on its merits by the production company, and they could decide to treat these workers as self-employed too, but when HMRC have clearly laid out their stall, sometimes it is easier just to accept it and stick them on the payroll.
To summarise, the lower-ranked production staff receive largely meaningless employment protection in exchange for being subject to a much less favourable tax regime. So, who would want to work in television?
These are general examples and not formal advice. Also, tax law is constantly changing, so the issues discussed here might now be out of date. Each taxpayer is different; therefore, we recommend that you consider your options carefully with an expert before taking any action.
If you want to discuss any of the above, or any other matter, just give us a call on 020 7183 3383 or email info@kma-spotlight.com.
