20m 4s
Could the freelancer you have hired for your production actually be seen as an employee in HMRC's eyes? And why does setting up a Limited Company not necessarily protect you from IR35 tax investigations?
In this episode, Keith Arrowsmith speaks with Erin Walls, an accountant with WallsMan Creative, to demystify the tax rules around hiring freelancers versus employees. As an ACA working across the creative sectors, Erin breaks down the criteria that can determine whether HMRC considers someone genuinely self-employed, and how this affects IR35 tax rules.
From the seemingly simple question of whose laptop you use to whether you have a company email address, Erin reveals why the same person could be considered a freelancer for one contract but an employee for another. She explores why production companies often insist freelancers work through Limited Companies, and the grey areas between contractor and employee where many working relationships actually sit.
Erin also gives practical tips about taking the HMRC online test about employment status, and about revisiting rolling contracts that may have initially started as short-term arrangements, but could last for years and create a very different scenario.
The WorkWise for Screen podcast is supported by the BFI, awarding National Lottery Funding.
This episode covers:
Introducing this episode about tax rules, understanding the difference between freelancers and limited companies and the IR35 rule explained. (00:00 - 05:25)
Breaking down the holistic approach HMRC takes to determining if you are a contractor or an employee, and ways production companies try to mitigate the risk of not complying with IR35 rules. (05:25 - 09:34)
The practical steps that are reasonable for most small production companies to take, and conclusions with Keith Arrowsmith. (10:14 - end)
"Under a certain threshold of earnings, if you set up a limited company, it's actually a very expensive way to operate. So people need to make sure they're in the right area." - Erin Walls (03:30)
"HMRC will look at the specific details of the contract and the work, and they can override whatever is written if they think it's still a sort of a play... A lot of the time companies will just say, look, if you're a limited company, then we feel like we're not taking the risk essentially." - Erin Walls (04:30-05:00)
"HMRC will come and look at a person... they'll look at lots of different things. So, for example, if I ring in sick one day and I say, I can't come today, do you wait for me to come back to work? Or do you call up another contractor?" - Erin Walls (05:30-06:00)
"Just because I think I'm a contractor, it doesn't mean those all are treated as freelance contracts by HMRC. They could look at me and say, actually, the Monday one looks like it's a freelance situation... but this one where you do Thursday, Friday, Saturday, every week... we think you look like an employee." - Erin Walls (06:30-07:00)
"There is an online test that you can take on the government website... At the end it says, we think you're this or we think you're that. And that gives you a guide... that would be your defense type thing. But yeah, a lot of the time it just depends what HMRC find when they look at the situation." - Erin Walls (09:00)
"Some people are given a contract for like three months or something and then it rolls and they're there two years later. That is obviously a very different scenario to what that initial three month contract was covering." - Erin Walls (17:16)
WorkWise for Screen:
https://www.workwiseforscreen.org.uk/
Keith Arrowsmith:
https://www.linkedin.com/in/keitharrowsmith/
Tacita Small:
https://www.linkedin.com/in/tacitasmall/
National Lottery:
https://www.national-lottery.co.uk/
Erin Walls:
https://www.linkedin.com/in/erin-achilleas-walls-aca-00aa4317/
WallsMan Creative:
https://creative.accountants/