Keith Clarke

Keith Clarke, Editor, Classical Music

There is something faintly ridiculous about Margaret Hodge and her public accounts select committee huffing and puffing over the tax avoidance prowess of Starbucks, Amazon, Google et al. Think what you like about the moral rights and wrongs of it, no one in their right mind is going to pay more tax than they are legally obliged to. That legal obligation is framed by the law makers – in other words, the very figures doing all this huffing and puffing. If legal loopholes are there, they are the characters who have created them. The remedy is surely obvious.

Law is of course open to interpretation, and a new reading of another bit of legislation is likely to have far reaching consequences for musicians. When ITV took on the might of Her Majesty’s Revenue and Customs over the tricky issue of whether its artists should be paying Class 1 national insurance contributions, the judge’s ruling (Yes they should) came with an added sting in the tail. Since an agreement reached eight years ago, HMRC has understood that self-employed musicians are exempt from Class 1 payments. In reaching his ITV judgment, the tribunal judge blithely swept away this understanding as ‘unsafe’. The HMRC website helpfully explains: ‘Liability for Class 1 NICs arises in relation to all types of entertainers (for example, musicians, singers) engaged under contracts where the remuneration includes an element of salary (as defined in the Regulations)’.

Behind the scenes, people are talking about the possible closure of several orchestras.

The whole thing hangs on the interpretation of that ‘element of salary’. It sounds like the kind of thing that could only be of interest to accountants, but potentially it could have a devastating effect on our music scene. As the Musicians’ Union puts it, ‘this may now mean the employer has to deduct from the fee and pay HMRC 12% Class 1 NI (the employee’s contribution). Additionally, the employer may also be liable to pay the 13.8% employers NI contribution’. You don’t need too much time with a calculator to get an idea of just how catastrophic this could be. And as with all things to do with tax, there is always the threat that the demands could be backdated by six years. Behind the scenes, people are talking about the possible closure of several orchestras.

This could not have come at a worse time for cash-strapped arts groups. Our music organisations are all over the issue, and will be saying some collective prayers that this month’s appeal hearing removes one of the gravest threats to the music business in recent times.