Agencies could be in for a huge cash windfall after the Inland
Revenue ruled that they have been wrongly paying National Insurance
contributions for performers they have hired.
The accountancy firm, Willott Kingston Smith, has been contacting
agencies to explain how new tax regulations governing National Insurance
contributions for self-employed performers will affect them.
The letter says employers may be able to reclaim National Insurance
payments made over the past six years.
The news follows the introduction of legislation on 17 July to force
employers to pay National Insurance contributions for self-employed
actors and other entertainers.
Until now it has been common practice for employers to pay National
Insurance for self-employed performers as if they were employees, even
though there has been no legal requirement to do so.
Now, the Government has ruled that while employers will have to pay the
contributions from now on, they can reclaim any payments made in the
past six years.
’This means that companies could be eligible to reclaim up to 10 per
cent of the gross earnings of all the performers they have engaged,’
Cliff Ireton, a partner at Willott Kingston Smith, said.
’That will mean substantial amounts of money for most agencies.’
But according to Chris Whitworth, the finance director of Publicis,
reclaiming cash may not prove easy for agencies.
’The important issue here is who will actually get their hands on this
money,’ he said. ’Theoretically it should be the advertisers, but it
will be very difficult to trace payments from five years ago back to the
agency and the production house.’
The new laws are designed to protect performers by ensuring that they
are eligible to claim the job seekers’ allowance when they are out of
work, even though they are classed as self-employed for income tax
The rules will remain in force until 1 February 1999, when an overhaul
of the National Insurance contributions system is due.