I understand that the Coalition Government (HMRC) are considering removing Class 1 NI status from actors, therefore denying them the right to the NMW. I think this is a disastrous move!
As you know I met in 1996 with the then Under Secretary of State, Oliver Heald, on this very subject. A matter of 17 years ago! See below. Yet for some perverse reason this NI status issue keeps coming up - like a perennial weed!
You kindly helped me to arranged a meeting with the relevant minister. I am now calling on your good offices to arrange a similar meeting with the latest encumbrance of this ministerial position.
What the government is suggesting is sheer farce. Actors would no longer have the right to the 'Minimum Wage' and a whole host of other safeguards. I can guarantee that performers will not sit idly by - if that happens...
NMW was never designed for actors anyway to be fair and we, as freelancers, or our representatives should be getting agreed payment terms in writing before setting foot on stage or screen anyway not fighting for peanuts in the courts after the fact! It's just good business practice!
If we are classed as wholly self-employed, then the many walk-on supporting artists out there, who continue to get a single days work each year, just to pay an agency book fee - will also have to pay a monthly Class 2 NI self employed contribution (£13.25), whether they are working or not!
Under their current classification, they pay Class 1 NI - only when they actually work...
I've always been a bit confused when it comes to NI. Perhaps you could clear it up for me? ;-)
I pay class 2 regularly. I get billed twice a year by HMRC, whether I'm working or not.
I also seem to pay NI on some jobs. Usually the higher profile jobs where I get a payslip etc. I'm not sure what class this one is but it gets automatically deducted. Why is it only some jobs where I have to pay this?
Also, a friend of mine earned a good chunk last year and had to pay a big NI bill on top of the tax bill. I think this was another class. Again, not sure which class. I don't think I've ever paid this class NI as I've never earned enough.
So... what I'm asking is... Does the above sound right? What class are they all?
And finally, after learning all this, how is it now going to change???
If you are paying NI on certain jobs... Then I would presume that this is Class 1 NI
I pay Class 2 contributions because I am self-employed too. I then pay Class 4 at the end of my tax year, based on any profits I make.
The government intend to remove Class 1 NI from performers. So everyone will be paying Class 2, even when they are not 'working'. Then Class 4 based on profits.
This change will mean that 'employers' do not have to consider paying you at or above the Minimum Wage. There will be no safeguards in place, because performers will no longer be regarded as 'workers'.
Forget about complaining to HMRC about NMW. Forget about 'workers' rights. Being 'Self-employed', means - just that...
Why are you paying Class 2 NI, do you do some other type of - self-employment?
I've been paying class 2 for years regardless of when I'm working or not! That is what I was told I needed to do. The nature of our work means I am in and out of work all the time so one minute I'm working and the next I am not.
That said, for the last 6 months I've been working as a quiz host and a football referee - both self employed. So I guess it doesn't matter now?
So... the new system doesn't really seem to change the way I pay NI. Apart from the fact that I won't pay class 1 - which is a good thing, no?
I understand what you're saying with regards to NMW but when have I ever been paid that anyway! Companies and agents decide fees during negotiations, and most other work we do for next to nothing already!
Over the course of the year I sometimes pay Class 1, 2 and 4! I have a few PAYE jobs and registered self employed. I pay Class 1 on some acting jobs and my PAYE jobs, then Class 2 every quarter as self employed and then Class 4 on the years I make enough profit through the acting - could I be paying to much NI?! I feel like I might be. I don't see how if you pay Class 2/4 every year you're not entitled to NMW etc – I’m paying NI after all so why do I lose entitlement?
I think I might need to call HMRC and ask them some questions. Though last time I spoke to them and said I was an actress I was told 'only businesses can make a loss'. Sigh.
The change will affect those who - do not do other work (self-employment). I work in 'Variety' as a presenter and as Santa. That is self employment.
As to - we already work for next to nothing? There have been some significant inroads to this problem. Employers have been forced into paying at least the NMW!
A lot of work has been done by others and myself through the Low Pay Commission. It will all have been for nothing, if the government get their way...
I asgree with the MU on this. I would love for this to happen. I am purely freelance mostly asa corporate roleplayer so Class 1 doesn't affect me at all . I only pay Class 2 and Class 4 but my husband does a lot of theatre work and occasionally stuff for the BBC and having Class 1 taken at source whether he wants it or not is a real pain. And because I didn't know until recently there's a box to tick to avoid paying Class 4 and Class 1 on the same income we have realised he overpaid NI quite substantially 4 years ago and trying to claim it back is next to impossible.
Those who have tiny self-employed earnings can apply for low earnings Class 2 exemption so people who do one or two days work a year DON'T have to pay Class 2 NI all year, that's nonsense.
For those who pay class 1 NI on some self-employed income, but are also assessed for Class 4 via tax return at the end of the year make sure you find Box 101 on your tax return which allows you to enter a different profit amount on which your Class 4 contributions will be calculated from your tax liability. So if your profits are £15,000 but you earned £6000 in theatre and paid Class 1 NI on it, you deduct £6,000 from the figure in Box 101. I wish I'd known about that box a long time ago.
The cynic in me says, this is the governments way of getting round their obligation (HMRS) to provide industry specific NMW guidelines. It means the 5 years of lobbying the Low Pay Commission, is now worthless. It means an end to 'employment tribunals' for most performers...
"Five actors have won an employment tribunal that ruled they should be paid the national minimum wage for a fringe theatre show, despite the engagement having been advertised as profit share."
One would like to believe a government NMW website - mentioned above. You will see that it clearly states:
Not entitled to the minimum wage
The following types of workers aren’t entitled to the minimum wage:
• self-employed people
But, according to Equity, this would not be the case for actors, who may be forced to pay Class 2/4 NI (self employed) instead of the current position - where they are not wholly self employed - and therefore pay Class 1 NI, in the majority of cases. They are deemed to be 'vulnerable workers'...
I think we all need some guidance. Is the NMW website correct, are those who pay Class 2/4, denied the right to the NMW. Will they be deemed to be wholly self employed.
Here is a reply dated 11 September from the Low Pay Commission:
Firstly, apologies again for not replying when you originally sent your message.
As you know the guidance on the minimum wage (and other issues) was moved a year or so ago from businesslink and directgov to GOV.UK. At the same time, the level of detail in the guidance was substantially reduced. The Commission is very concerned over the level of guidance currently available and is continuing to press the Government to improve this. The Commission has reported on this in its last two reports.
Regarding your specific point, the website is correct; the NMW does not apply to those who are self-employed. Neither the National Minimum Wage Act 1998 nor the National Minimum Wage Regulations 1999 define self-employment for NMW purposes. But that is perhaps not unsurprising because the legislation applies to someone who is a “worker”, as defined in section 54(3) of the Act.
As you're probably aware, when looking at whether someone is a worker or not (for NMW purposes), HMRC look at the contractual relationship between the parties. When it is not clear whether a contract exists between a worker and an employer, HMRC would have to consider the arrangements between the parties. There is no definitive list of factors to consider, but over the years, the courts have provided guidance on what constitutes a contract of employment. Case law shows that there is no ready formula by which a contract of employment can be identified. Nor is there any single factor that will be determinative. Rather, all the possible factors which bear on the relationship between the parties must be examined.
One of the (many) factors that needs to be considered is how NICs (and tax) are paid (i.e., whether someone is paying Class 1 NICs as an employed person; or Class 2 NICs as a self-employed person). But which class of NICs someone pays can sometimes stem from the nature of the contractual relationship that the parties think they have created, rather than what it actually is. And for certain types of employment there are, for NICs purposes, special rules.
So the fact that an actor is paying Class 2 and Class 4 NICs does not necessarily mean that they will not be entitled to NMW. Equally, an actor paying Class 1 NICs might not be entitled to NMW. The class(-es) of NICs that someone pays, and underlying reason for paying it/them, is only one of the factors that needs to be taken into account in determining whether someone is engaged under a contract of employment or a contract for services.
So the website is correct in that those that are self-employed are not entitled to the NMW (and this was as stated under the old guidance on businesslink and direct gov). But as set out above, it is not quite as straight forward as that and someone who has been assessed as self- employed for tax purposes may not necessarily be self-employed for the purpose of the NMW.
Class 2 & 4 NICs do not contribute to the extended pension. If you only pay class 2 & 4 NICs, you will only get a basic state pension, the same as unemployed people who have taken benefits all their lives. How pathetic is that?
One way out is to register yourself as a limited company and become an employee of the company. It's more complex, but I am thinking about it.
National Insurance - Who pays
Class 1 Employees earning more than £149 a week and under state pension age - they’re automatically deducted by your employer
Class 1A or 1B Employers pay these directly themselves on their employee’s expenses or benefits
Class 2 Self-employed people - you don’t have to pay if you earn less than £5,725 and apply for a ‘small earnings exception’
Class 3 Voluntary contributions - you can pay them to fill or avoid gaps in your National insurance record
Class 4 Self-employed people earning profits over £7,755
This page may also helped those getting bogged down by it all if you are both employed (paying Class 1) and Self employed (Class 2 and 4).
When you are filling in your tax return be really thorough (even though it is complex) to avoid paying too much. Make sure you instruct your accountant what you have paid in NI where and for what earnings to hopefully ensure that you don't overpay.
Married women/widows/people with earnings under £5725 have discount or exemption possibilities.
Note that is £5725 after your expenses have been deducted so it is well worth discussing with an accountant or equity what you can claim for. As you might not be claiming for things that you can claim for and therefore be paying too much tax and NI.
Actors can claim for things like cosmetic dentistry and many other things. If you fill in your own tax return it is good idea to get clued up on what is allowed.
Also Refunds of overpaid NI are available from HMRC - it will more than likely be a long drawn out process as many things can be with this sort of thing. But applications can be made and the information is all on the HMRC website on the following link.
Hope this helps. My main advice if you're really struggling is speak to an accountant, this is their field and will know the ins and outs of everything.
It may seem like an initial expense but they could save you money. Just shop around as some massively overcharge because they know that people blindly pay them.
Kat :)
10 years ago
20
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