As the withholding tax system relies on Payers knowing how to carry out their role we have designed a guide specifically for them. However, much of the information it contains is also useful for payees, entertainers and sportspeople. The Guide contains the following sections:
To avoid repetition the term 'entertainer' is used in this Guide to cover both non-resident entertainers and sportsmen and women. Examples in the Guide assume a basic rate of tax of 20 per cent. The basic rate in force in any particular year can be obtained from the 'Rates and Allowances' section of the HM Revenue & Customs (HMRC) website.
Any payer who makes a payment to or on behalf of any person, which in any way arises directly or indirectly from a UK appearance by a non-resident entertainer must deduct or account for tax at the basic rate.
There are certain exceptions from the scheme. You will find details in the section Which payments are excepted from withholding tax?
Payments include cash, cheques, bank transfers, online transfers and also a loan of money. The list below gives some examples of payments:
The scheme also applies to transfers of assets, for example, a motor car for a 'hole in one' during a golf competition. Where assets are transferred Withholding Tax does not apply to the payment for the acquisition of the asset but tax should be accounted for on the transfer to the entertainer. The scheme also applies to expenses paid on behalf of the entertainer. See How to work out the withholding tax.
The short answer is no!
Any payment made in respect of a non-resident entertainer, to any other individual or organisation, whether they are resident in the UK or overseas, falls within the scheme and is subject to Withholding Tax.
Any appearance by the entertainer in the UK for which a payment is made, will be within the scheme.
A simple case would be the entertainer appearing in his or her recognised profession. This might be an actor performing in the theatre or a golfer competing in the Open Championship.
However the scheme is much wider than this. It also covers promotional activities, advertising and endorsement of goods or services. This may include a photocall, TV/radio interview or other appearances.
The appearance does not have to be in front of an immediate audience. It may include film work, video, radio or live/recorded television.
Any payment which arises directly or indirectly from a UK appearance will be within the scheme. In most cases it will be easy to find the link. For example, a tennis player competes at Wimbledon and receives prize money or a singer is paid for performing at a concert at Wembley.
The payment does not have to have a direct connection with the UK appearance. Endorsement fees paid to a tennis player using sports equipment in a UK tournament would be linked.
The following list is not exhaustive. athletes, golfers, cricketers, footballers, tennis players, boxers, snooker players, darts players, motor racing drivers, jockeys, ice skaters, contestants in chess tournaments, singers, musicians, conductors, models, dancers, actors, TV and radio personalities, variety entertainers. The person may appear alone or with others in a team, choir, band, group, orchestra, opera company, ballet company, troupe or circus.
In most cases it will be obvious.
You may know from the agent or management company, perhaps from the need to obtain a work permit or visa.
A UK national who is non-resident also comes within the scheme. They should not be treated any differently from a non UK national for Witholding Tax purposes.
If you are uncertain about the residence position of an entertainer then you must obtain clarification from the entertainer, their manager or representative.
If there is still any doubt as to the residence position of an entertainer then Withholding Tax must be deducted.
If you engage a non-resident entertainer as an employee and operate Pay as You Earn on payments to that entertainer, you do not need to deduct additional Withholding Tax on those payments.
Withholding Tax does not apply to payments made in respect of copyright, royalties or advances on royalties. For the treatment of such payments please see Section 906 Income Tax Act 2007 (Opens new window).
You do not need to deduct and account for tax on payments made direct to an entity for ancillary services such as:
You do not have to deduct and account for tax on payments made to an entertainer for record sales (including vinyl, cassette, CD and Audio only USB sticks) where the payment relates to one of the following:
Do not withhold tax if the total payments made to an individual or group, including any connected payments by an associate, will be equal to or less than the UK Personal Allowance for the tax year. The tax year runs from 6 April in one year to 5 April in the following year. The Personal Allowance normally changes each year, the current years Personal Allowance can be obtained from the 'Income Tax rates and allowances' section of the HMRC website.
The total payment for this purpose includes not only cash, but also expenses paid on behalf of the entertainer such as airfares or the cost of an asset transferred to the entertainer.
If you are making the first payment and it is less than the current Personal Allowance but you know in advance (for example, from the contract) that the total payments for the tax year will be more than the current Personal Allowance, then you should deduct tax even from the first payment.
The payer knows in advance that he will be making total payments of £12,000, made in three installments.
1st payment = 4,000
Less tax withheld at 20% = 800
Net payment to entertainer = 3,200
2nd payment = 4,000
Less tax withheld at 20% = 800
Net payment to entertainer = 3,200
3rd payment to entertainer = 4,000
Less tax withheld at 20% = 800
Net payment to entertainer = 3,200
Total payments = 12,000
Tax withheld = 2,400
Net payments = 9,600
Payments made direct to any payee included on the following lists may be made gross (without the deduction of tax):
If you are in any doubt at all about which payments are excluded from the scheme please contact the Foreign Entertainers Unit for advice.
Each time you make a payment you must deduct tax at the basic rate, unless an arrangement has been made with the Foreign Entertainers Unit and they have issued an authorisation to deduct an amount of tax other than the basic rate tax. (see Application to HMRC to limit the Amount of tax withheld) or the payments are excepted from withholding tax (see Which payments are excepted from Withholding Tax?).
You may be liable for the payment of Witholding Tax if you do not deduct the tax when it is due.
For example, a music group or a theatre company which includes both UK resident and non-resident performers.
Where you are paying or transferring money it is very straightforward to work out the tax.
Assuming the basic rate percentage for the year of payment is 20 per cent then you should deduct this percentage from each payment made.
Gross Payment = £10,000
Tax (10,000 x 20%) = £2,000
Net amount paid to entertainer = £8,000
The same applies to a loan of money. You should deduct tax from the amount of the loan.
All payments of Withholding Tax made to HMRC must be made in sterling. If you make a payment directly or indirectly to an entertainer in a foreign currency you should calculate the Withholding Tax due using the rate of exchange at the time when the payment is made or at the rate used at the time the foreign currency was purchased. The rate of exchange used should be shown on your return form FEU 1.
If the transfer of an asset is involved (for example, a motor car for a 'hole in one' during a golf competition) you must account for the tax as if the asset's cost to you or in connection with providing it was the net amount of the payment.
Withholding Tax is also due on expenses provided for an entertainer.
For example, hotel accommodation, airfares, UK transport etc.
In the absence of an agreement with the Foreign Entertainers Unit, Withholding Tax must be accounted for and paid by the payer, from its own funds, on payments made in respect of expenses provided for an entertainer.
The Withholding Tax due must be calculated as follows:
The airline ticket costs you £1,000. You need to work out the gross amount of the payment and pay tax on that amount. To work out the gross amount you do the following sum.
Net amount of payment £1000 x 20 (basic rate of tax) divided by 80 (100% - 20 basic rate of tax) = £250
Add the tax amount £250 to the net payment £1000 to get the gross payment £1250
Add the result to the net payment to get the gross payment.
£250 + £1,000 = £1,250
Tax (£1,250 x 20%) = £250
VAT is not chargeable on Withholding Tax and you should therefore exclude the VAT when calculating Withholding Tax due.
Some activities may give rise to a chain of payments. Every payer in the chain must deduct tax as required by law unless the payment is exempt. (Which payments are excepted from Withholding Tax?)
A concert is arranged at a venue. The venue owners control the box office and pay over the ticket proceeds to the promoter less their costs and Withholding Tax. The promoter is then required to deduct Withholding Tax from the fee payable to the entertainer. The promoter should deal with this as follows:
A Promoter engages a non-resident entertainer to appear at a UK venue.
The Entertainer is the only non-resident entertainer the promoter engages in the quarter. The sequence of payments is as follows:
The Venue pays £100,000 less £20,000 tax to the Promoter
The Promoter pays £60,000 less £12,000 tax to the Entertainer
The Promoter is liable to account to HMRC for £12,000 but as the payment he has received has had £20,000 Withholding Tax deducted from it he can treat the £12,000 as paid.
The amount and income tax columns of the Promoter's return for the relevant period should be completed as follows:
|Less tax already paid by Venue||12,000|
|Tax payable now||Nil|
Evidence of the tax already paid must be provided with the FEU1 return by including part 3 of the FEU2 tax deduction certificate which is supplied by the Venue.
You will find details of how the payment is treated in the Promoter's company accounts and of the repayment of tax in certain circumstances at How are payments dealt with in your Self Assessment or Corporation Tax Accounts?
Payers can ask for an arrangement which moves the withholding point further down the chain so that payments between specified payers can be made without deduction of tax. This can only be done with the Foreign Entertainers Unit's approval.
If the concert promoter makes a 'Middleman' application, the Unit may agree to the promoter being the witholding point, therefore the venue will not have to withold tax. The promoter will then have to deduct tax at basic rate on his or her payment or a reduced amount if an entertainer's application for a reduced tax payment has been made and agreed.
The Unit will ask for certain information in support of any 'Middleman' application you make, for example, a copy of any contract, dates of appearances, and probably a copy of the budget. If you are submitting a 'Middleman' application for the first time the Unit will be happy to advise you on the procedure and level of information required.
You must pay the tax within 14 days after the end of the return period during which the payment was made. The return periods for each tax year are:
HMRC will send you a form FEU 1 before the end of each Return period. If you want to use your own form FEU 1 you must submit it to the Foreign Entertainers Unit for approval before you do so.
It is your responsibility to make a return of payments. HMRC will not notify you when a return is due. If you have not received form FEU 1 by the end of the return period, please telephone The Foreign Entertainers Unit.
Any new payers must contact the Foreign Entertainers Unit who will issue a Starter Pack which will contain the relevant information and forms.
The form FEU 1 must be completed and returned to the Accounts Office, Shipley within 14 days of the end of the relevant period. Please note the return should include every payment made including those below the Personal Allowance and those where tax has not been deducted (Which payments are excepted from Withholding Tax?).
Where tax is due, if it is not paid within 14 days of these dates you may become liable to an interest charge.
Whenever you make a payment from which you have deducted Withholding Tax, you must complete a tax deduction certificate, form FEU 2.
This form is in 3 parts
Part 1 : Send to Accounts Office Shipley together with your form FEU 1.
Part 2 : Keep this for your own records.
Part 3 : Give this to the payee as a certificate of the payment made and tax withheld.
If the payee loses the original certificate and requests a duplicate, this must not be issued, tell them to contact the Foreign Entertainers Unit.
You are not required to issue a form FEU 2 where, for whatever reason you have not deducted withholding tax (Which payments are excepted from Withholding Tax?).
Withholding tax deducted is regarded as a payment on account of the final UK tax liability of the entertainer.
An application may be made in writing by the entertainer or anyone else authorised to do so on their behalf. Where the application is agreed, it allows the payer to deduct an amount other than the basic rate of tax which corresponds as near as to the entertainer's final UK liability on that payment.
An application to HMRC to limit the amount of tax withheld may be made in writing or on form FEU 8 (PDF 105K). Any letter which advises the Unit that detailed figures are to follow is considered to constitute an advance notification of an application but does not constitute the application itself.
Applications to the Foreign Entertainers Unit must be made no less than 30 days before the date the payment is due.
If the application is not agreed tax must be accounted for at the basic rate on all related payments.
The information required to enable an agreement to be made includes:
The application should give sufficient information to show how figures have been arrived at (including the basis for any estimates) and how expenditure appropriate to several countries has been apportioned.
In some cases you may be authorised to deduct a reduced rate of tax, a fixed sum or no tax from the gross payment. This could apply, for example, where an entertainer has to meet substantial expenditure out of a gross fee thus reducing the expected UK tax liability.
In reaching an agreement the Foreign Entertainers Unit will make allowances for admissible expenses. What can be allowed depends on the general rules covering expenditure allowable in arriving at taxable business profits under Section 34 Income Tax (Trading and Other Income) Act 2005 (Opens new window) and the facts of each case. Normally allowances will be made for:
Other expenses may be allowable. What is allowable in each case will need to be agreed with the Foreign Entertainers Unit including the proportion of any costs appropriate to several countries.
Further information can be obtained about Reduced Tax Payment Applications including further advice regarding the preparation of an entertainer RTPA.
If the point you wish to check is not covered in this guidance or at the above link then contact the Foreign Entertainers Unit.
The Foreign Entertainers Unit will authorise you to deduct a reduced amount of tax by sending you a form FEU 4. Even where you have been a party to the agreed arrangement with HMRC you must wait until you get the form FEU 4.
If you have not received an authorisation form FEU 4 by the time the payment is due you must deduct tax at the basic rate on all related payments.
If the income you receive is attributed to the entertainer under the rules set out in Regulation 7 Income Tax Regulations 1987 (Opens new window) then the tax withheld from the payment you receive will be treated as a payment on account of the entertainer's UK liability.
You will not be charged to UK tax on that income and there will be no repayment of the Withholding Tax to you.
The amount of the assessable income will be the payment received plus the amount of the Withholding Tax which has been deducted. You will be able to claim the gross payment you make as a deduction in your UK Income Tax or Corporation Tax accounts.
'Gross payment' means the payment to the entertainer or intermediary
plus the tax
accounted for to HMRC.
If you make the payment in a series of payments as described at How to work out the tax, you may be entitled to set off tax withheld from payments you receive against your UK tax liabilities or claim a repayment of tax.
A UK Venue pays box office income of £100,000 to a UK Promoter in respect of the performance of a non-UK resident entertainer. The Entertainer is paid a fee of £60,000 by the Promoter
A venue pays £80,000 to the promoter. This is £100,000 less £20,000 which is 20% tax. The £20,000 tax is paid to HMRC.
The promoter pays £48,000 to the entertainer. This is £60,000 less £12,000 which is 20% tax. The £12,000 tax is paid to HMRC.
The Venue is allowed the expense of £100,000 (that is the gross payment shown in his accounts).
The Promoter has a receipt of £100,000 as income and is allowed £60,000 as an expense in its accounts.
The Promoter can claim to set the excess Withholding Tax of £8,000 against its Income Tax/Corporation Tax liability for that accounting period. i.e. £20,000 less the payment of £12,000.
If the Promoter had a tax liability of less than £8,000 it can claim a repayment of the amount by which £8,000 exceeds its Income Tax/Corporation Tax liability for that accounting period.
If a payer does not deduct Withholding Tax from a payment, or does not pay over tax which he has deducted, then HMRC may make an assessment (Opens new window) to recover the tax due direct from the payer.
An assessment may be made on the payments made in the tax year or for a particular period (see How do you pay the tax that you have deducted and/or accounted for?). The tax charged in the assessment is regarded as being due and payable by the 14th day after the end of the relevant return period for which it was originally due.
You will see therefore that there is no advantage in delaying payment and waiting for an assessment. The tax will be treated as due at the normal time and interest calculated accordingly.
Any appeal against an assessment made to recover Withholding Tax should be made in writing to the Foreign Entertainers Unit. The appeal should be made within 30 days from the date the notice of assessment was issued.
Interest may be charged and recovered by HMRC if Withholding Tax is paid late. (How do you pay the tax that you have deducted and/or accounted for?).
The Foreign Entertainers Unit will be able to call for information from payers, providing due notice is given. The information which the Inspector can request is fully set out in Regulation 9 of the Income Tax (Entertainers and Sportsmen) Regulations 1987 (Opens new window).
The forms shown below are those that the payer may require/receive:
FEU 1 Return of payments made to non-resident entertainers
FEU 1(CS) Payer's Return continuation sheet
FEU 2 Foreign Entertainers Unit tax deduction certificate
FEU 4 Payer's notification that basic rate Withholding Tax is not appropriate
The forms shown below are those that the payee may require/receive:
FEU 2 Foreign Entertainers Unit tax deduction certificate
FEU 8 (PDF 105K) Application for Reduced Tax Payment (not mandatory: applications can be made by letter or fax).
If after reading this guide you have any questions or require further information, please contact the Foreign Entertainers Unit.