Entertainment and Music | | Sep 06, 2016
There have been some remarkable developments in the UK these last few months, not least of which the United Kingdom has voted to leave the European Union. This will have absolutely no effect on US entertainers performing in the UK or continental Europe. There will still be visa issues, immigration in and out the UK, and British beer will remain warm and heartening.
What will have some effect on visiting performers is the way HMRC FEU – Foreign Entertainers Unit – deal with visiting performers and withholding on their performance income. Below we set out some issues that will be of concern to visiting performers and some tips on how best to navigate these issues.
At the time of writing the FEU is approximately 12 weeks behind in dealing with mail. The legislation requires an application for a reduced rate of withholding to be submitted 30 days before payment is due. Note not the date of the performance but the date of payment. UK promoters are required to account quarterly for payments made to visiting performers and there have been occasions when the quarterly accounting date follows hard on the performance/payment date giving little time to negotiate with the FEU. Given the FEU is 12 weeks behind with its mail, the scope for an exchange of information and to answer any FEU queries is all too often less than zero. For larger tours it is imperative that if a reduced application is to be made it is done well in advance.
REDUCED RATE OR NOT
If a reduced rate application is not made or agreed the legislation provides that a withholding equal to 20% of the gross payment to the visiting performer is to be deducted. For some visiting performers, the tax at 40/45% of net profits is greater than 20% of gross. Always worth doing the calculation first.
UK TAX RETURNS
Strictly speaking, visiting performers have a liability to file a UK Tax Return in the tax year after the tax year of performance.
The onus on whether a Tax Return needs to be submitted is that of the performer and penalties and interest will be raised by HMRC where returns have been submitted late and tax underpaid. So if there has been an underpayment of tax because the amount withheld is not sufficient there is a requirement to self-assess and submit a Tax Return.
HMRC will only issue a notice to the performer to submit a Tax Return where they believe there has been an underpayment of tax. The issuing of such a notice may be some time after the date the Return was due to be submitted by which time the performer may be in the penalty and interest regime so the message here is that if the tax withheld is less than the actual tax due then don’t wait for HMRC to come knocking, instead make arrangements for a Tax Return to be prepared and filed and for any additional tax due to be settled
THE ELECTRONIC AGE
Believe it or not, the FEU has reviewed its security protocols and after 30 years of receiving and sending correspondence by fax machine, it has decided not to do so anymore. So for 30 years our faxes have not been secure!
The FEU has also made it clear that they do not communicate by email. While the rest of us embrace the digital age the FEU is retreating into the past. We confidently expect the next notification from the FEU to say it will only accept post delivered by pigeons. Joking apart, this is a serious deterioration in HMRCs service standards.
To make matters worse the FEUs mail arrangements are such that letters take 10 days or more to find their way from the FEU officer’s desk to the recipient. Now more than ever visiting performers need to provide information well in advance and to be able to engage UK based advisers who can arrange for next day delivery of information.
DAYS IN THE UK
The FEU has a very questionable policy of not allowing for costs of performers/crew staying in the UK where that stay exceeds the day before the performance and the day after. If visiting performers are unable to arrange travel and days in the UK to meet the FEU’s policy, then the ability to file a Tax Return in the following tax year is the only effective course of action to get credit for those additional costs and to recover any excess tax withheld.
FEU POLICY AND THE LEGISLATION
Regrettably, there is no appeal mechanism against the excesses of the FEU except to file a Tax Return in the next tax year. There are a number of areas where FEU policy seems to diverge from the legislative requirements not least in areas such as security, merchandise, payment for work performed prior to the UK visit (rehearsals, costume fitting etc) and contractual fees to non-performers.
TAX OR PAYMENT ON ACCOUNT DOES IT MATTER
Many US performers treat the amount withheld as tax itself whereas strictly speaking it is a payment on account of tax and not the actual tax. The actual tax bill may be different due to, amongst other things, HMRC being over-restrictive on expenses on a reduced rate application. Where withholding has been at the statutory rate of 20% on gross it is highly likely that the actual tax needs to be ascertained correctly and a Return filed in the UK.
We can help. From sole performers to orchestras, from musicians to film actors, from sportsmen and woman to dancers. No matter how small or big we have the experience and the dedicated staff to help. As well as being well informed we have a wealth of experience and skills to deploy on behalf of visiting performers to the UK and Europe.
For assistance do contact one of the following;
Mark Boomla email@example.com
Arvinder Matharu firstname.lastname@example.org
Or by phone on 00 44 207 632 1400