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Self-employed arts workers face extra £1k in tax-related fees

Photo: El Nariz/Shutterstock Photo: El Nariz/Shutterstock
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Self-employed people working in the entertainment industry face paying more than £1,000 extra per year in tax return fees, as part of government reforms that have been described as a “bureaucratic nightmare”.

Entertainment unions Equity and BECTU have raised concerns about the government’s proposed Making Tax Digital reforms, calling for the sector to be exempted from requirements due to the nature of the work.

The reforms would cover all businesses with a turnover of more than £10,000, including self-employed individuals, and have been proposed in order to create a “transparent tax system fit for the digital age”.

The plans include quarterly data submissions, with year-end tax payments, as opposed to the current filing requirements, which are annual. There are also proposals to allow income tax to be paid on a pay-as-you-go basis.

The reforms would include using approved software to upload information, such as receipts, to a personal account online. It is currently unclear what the cost to individual taxpayers will be, however HM Revenue and Customs said it had committed to making software free for the smallest businesses.

Equity tax and welfare rights organiser Alan Lean said he had “major concerns” about how manageable the HMRC plans would be for individuals working in the entertainment industry. He added that it had the potential to be a “massive burden” on members, highlighting both the increased time that will need to be spent on tax administration and the potentially higher cost, if accountants were needed four times a year.

It is estimated by accountants that the impact on the average self-employed person in the industry could be about £1,250 per year – based on costs of current software and competitive tax administration.

Lean said the plans would be “completely impractical” for performers or theatre professionals working on tour or away from home, who might not have access to a reliable internet connection.

He said that in the long-term, it could allow taxpayers to have increased information about their data, and that costs could be spread by a pay-as-you-go system.

He added that Equity was having positive dialogue with HMRC about the issues facing its members, but said the union thought the entertainment sector should be exempted “because of the way it operates, often on short-term contracts… and the fact that [individuals] might not know with more than a few days’ notice that they’re going to be away”.

BECTU research officer Tony Lennon told The Stage that the digital tax reforms were “in principle a good idea”, but said: “In practice, this is going to be a bureaucratic nightmare for tens of thousands of self-employed freelancers in the entertainment sector.”

Both Lennon and Lean also expressed concern over HMRC’s proposed implementation timeline, which would see the changes come into force in April 2018, claiming it is too early for proper familiarisation with the regime.

Tax advisor Dave Morrison, from entertainment accountants Nyman Libson Paul, said the timescale was “ambitious”.

A spokesman for HMRC said it was aware of new apps that will cater for people with unusual working patterns, as in the entertainment industry.

He added that other areas being explored by the consultation process – which is now closed – included deferring implementation for the smallest businesses and looking at the threshold at which the requirements become mandatory.

“We are also consulting on proposals for a points-based penalty system that would apply financial penalties only after several filing obligations had not been met,” he said.

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