Agencies alerted over tax windfall

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.

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

purposes.



The rules will remain in force until 1 February 1999, when an overhaul

of the National Insurance contributions system is due.



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