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D Michael Rose

Q: Do I pay the agent or the act?

If a production company uses an artist, are fees owed to the performer rather than his agent? Does the fact that the agent raises the invoice alter anything? And if the agent passes on the payment to the artist, does the latter have to pay VAT?

A: In the usual case of a theatrical agent acting as agent for a named client the fees are undoubtedly owed to the performer rather than his agent. After all, the performer had done the work and it is his fee. The agent is merely acting as an intermediary on behalf of the performer, and would be the first to disclaim personal liability under the contract on that ground. The person who has the right to collect the fee and to whom it should be paid is another matter.

In the absence of any stipulation to the contrary, the producer should pay the performer to be absolutely sure of getting a good discharge. However, it is the normal custom and practice of the industry for the contract, between performer and agent, to give the agent the exclusive right to collect the performer's fees and for the contract between the agent and the producer to contain a similar stipulation. Indeed, in the absence of any stipulation to the contrary the agent arguably has implied authority to collect the fee by virtue of the normal custom and practice of the industry. Nevertheless, in the case of mere authority which is not expressed as irrevocable (as distinct from assignment or grant of exclusive right to collect) the performer can notify the producer that the agent's authority to collect the fee is withdrawn and require that the fee be paid to the performer. In that event, the producer will be liable to the performer if he ignores such a requirement and pays the agent who fails to account to the performer for it. For the producer to be legally obligated to pay the agent rather than the performer, it is necessary (i) for the agent to have irrevocable a authority or the exclusive right to collect payment and (ii) for this to be notified to the producer.

If the agent raises the invoice, he is warranting to the producer by so doing that he, the agent, has the performer's authority to collect the fee. In a case where, unusually, the agent is not authorised by the performer to collect the fee but still invoices the producer for it, the agent will be liable to the producer for breach of warranty of authority if the producer is then sued by the performer because the agent fails to pass payment to the performer.

All this assumes that the agent was acting as an agent in the strict sense of the word. Sometimes, however, an artist will contract his services to a theatrical agent for an agreed period and fee (a so-called 'net deal' arrangement), in which case the agent will be acting as a principal in supplying the performer's services to the producer, and the producer must pay the 'agent' rather than the performer. In such a case, the 'agent' should make it clear to the producer from the start that be, the agent, will be the contracting party and will not be acting in an agency capacity.

As to VAT, in the usual case the agent on the performer's behalf should raise the invoice in the name of the performer who has made the taxable supply, and VAT should be added only if the performer is VAT registered. Registration is required in the event of having a turnover or potential turnover of more than £50,000 per annum. The agent should then invoice the performer for the agent's commission and add VAT on that commission if the agent is himself registered for VAT.

If, however, the agent is acting as principal in the circumstances described above and is registered for VAT then the agent must himself issue the invoice in his own name and charge VAT on the total fee, whether or not the performer is registered. If the performer is registered he must charge VAT on his fee-to whichever of the producer or the agent he is supplying his services, depending on which of the two situations described above is applicable.

There is another situation where the theatrical agent will be acting as principal and that is where, for example, he agrees to supply an unnamed performing artist of his choice as a celebrity to open an event. In such a case the 'agent" will again be acting as principal, both in his contract with the event organiser and in his contract with the artist. In such a case, if both are registered for VAT, the artist should render a VAT invoice to the agent and the agent should render a VAT invoice to the event organiser. In practice, the agent will probably render a bill to himself in the name of the artist under what is known as the 'self-billing system' for VAT purposes.

If the artist is not registered for VAT (because his turnover or potential turnover is below the VAT threshold) then VAT is not chargeable on his fee, but the agent, if he is registered, must still charge VAT on his commission for the taxable supply of his services. I know it all sounds very complicated, but I am afraid I cannot simplify it any further.

First published January 1997