Will IR35 Change How you Pay Tax?
Tax rules for workers with their own limited companies are due to change in April 2021 for anyone with private sector engagers.
From then, the legal duty to determine whether the worker
is actually an employee (and should be PAYE) or self-employed (Shedule D or LTD Company/Personal service company) for tax purposes will rest with the company that engages you (‘the engager’).
The legal framework is often referred to as ‘IR35’.
How does this affect members?
As of April 2021, engagers in the private sector (the public sector went through this change in 2017) will be responsible for making sure that individuals are paying tax in the correct manner. Until now, it has been the individual’s responsibility. This means that they will most likely be far more cautious about employing crew through Personal Service Companies as they will be liable if they have done so incorrectly.
What can you do if you are told that you cannot be regarded as self-employed by your engager?
First, check if your position is listed on HMRC Appendix 1. This is a list of grades that HMRC already considers to be self-employed. This should be read in conjunction with the HMRC Employment Status Manual (ESM4115). This list is by no means exhaustive and if your grade is not listed, that does not automatically mean that you are not self-employed. If your grade is listed then you can point this out to your engager who should be able to accept your self-employed status or PSC.
Secondly, if you are not on the list, you can apply to HMRC for a Lorimer Letter or an LP10 Letter, which assures engagers that you are self-employed, but will need to demonstrate that you have worked for at least 10 engagers, each for less than 10 days, in the previous year. You can do this by contacting HMRC. The Film and TV Production Unit for HMRC is called SO733 and their contact details can be found HERE.
Thirdly, if the previous stages do not currently apply to you, you have the right to request a Status Determination Statement from your engager to see what criteria they used to determine you as an “employee”. For many, this will have been done by a production office worker who may not know the details and intricacies of each job role so it is worth checking to see if they have entered your details correctly. Most will have used the HMRC Online Status Checker and you can do it yourself. If, in doing so, you have a different outcome then you will have stronger grounds for challenging the employment status assigned to you by your engager.
What is the union position on this from 2021?
Bectu believes that the vast majority of freelance members in the entertainment sector are small businesses in their own right, and therefore not employees of their engagers.
What should members do next?
For guidance on IR35, employment status and how to challenge it please read this very useful webpage on the Bectu Website. On there, you will also find a link for the Bectu Tax For Freelancers Guide (this is for members only) which explains everything in much greater detail.
Bectu have been holding regular meetings about IR35 so please keep an eye on your email for details of the next one.
As always, you can email us for more information.