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Summary of Selected Cases
INLAND REVENUE
Changes to the taxation of actors' incomes
Matters considered:
The time taken by Inland Revenue (the Revenue) to implement a change affecting the taxation of actors' incomes.
Summary of case
Until 5 April 1990 actors were taxed by the Revenue on the basis that they were self-employed. Following a High Court decision, the Revenue advised all theatre managers that, from 6 April 1990, tax should normally be deducted under PAYE from income paid to actors engaged on standard Equity contracts. Representative bodies of the profession disagreed with the Revenue's new approach and the tax affairs of two actors were selected as test cases. The Special Commissioners of Income Tax held in July 1993 that the two actors were to be taxed as self-employed. In February 1994 the Revenue told the Clerk to the Special Commissioners that they had decided not to pursue appeals to the High Court. In August 1994 the Revenue told theatre managers not to treat actors on standard Equity contracts as employees automatically but to review the terms of engagement of their actors and to stop deducting tax under PAYE if those terms amounted to self-employment. It then took until August 1995 for the Revenue to instruct their staff to recompute the tax liability of actors for the period from 6 April 1990 on the basis that they were self-employed.
Findings
I found that while the Revenue needed to consider the technical and legal consequences of the Special Commissioners' decision, they were slower than they might have been in taking the action they eventually did.
Remedy
The Revenue agreed to pay repayment supplement (or an equivalent amount where no statutory basis for paying repayment supplement existed) of tax refunds due. They offered apologies to the complainant and said that they were willing to reimburse any reasonable costs which she had incurred as a direct result of the Revenue's delay in making the repayment of the tax refund due.
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