Actors: IR35 tax rules will probably apply.

In a recent tax tribunal test case, relating to the well-known actor Robert Glenister, HMRC were challenged as to whether the IR35 intermediary tax rules should apply to an actor earning his living through a personal service company.

As is typical with individuals providing their personal services through an intermediary company, Mr Glenister had set up his company with alphabet shares, jointly owned with his wife. This was presumably to facilitate tax efficient profit extraction, by use of both spouses’ tax allowances and the avoidance of NIC through payment mainly as dividends. HMRC initially ruled that IR35 should apply, so Mr Glenister took the case to appeal.

The appeal considered 3 technical points, all of which the tribunal dismissed. Although not referred to explicitly in this case, due to this actor’s personal celebrity status, there was presumably absolutely no right of substitution within the relevant contracts with the end clients, so it is perhaps not at all surprising that IR35 applied. Actors considering trading as a limited company should be aware of this tax case. Although it will adversely influence how they extract their ‘pay’ from the company, it will not necessarily stop them structuring their affairs through a personal service company. Due to the feast and famine nature of their income streams, having control over which month of the year salary is extracted, relative to 5^th April, does give them the ability to optimise tax allowances and tax bands over 2, rather than 1, tax year.