Tour Promoters – How to Reduce Withholding Tax

Guitarist on stage

In our post “Withholding Tax, Tour Promoters & Overseas Artists” we looked at HMRC’s withholding tax system and how it applies to overseas artists performing in the UK. In essence, promoters must deduct a 20% withholding tax from all income generated by the non-resident artist.

However, it is possible to apply to the Foreign Entertainers Unit of HMRC to reduce the amount of tax withheld from 20%.

When should I make an application to reduce withholding tax?

Your application must be made at least 30 days before the date the payment is due.

How do I make an application to reduce withholding tax?

You can simply make an application in writing. However, the easiest way to apply is to complete the HMRC form FEU 8. The application can be made by you in person, or with the assistance of your accountant.

When making an application, you will be required to provide the following information in respect of the artist:

  •     dates of arrival in and departure from the UK;
  •     whether the artist is likely to return to the UK in the same tax year;
  •     a projection of actual or estimated total income;
  •     the date of each performance and the name and address of the venue;
  •     a schedule of the projected actual or estimated expenses which will be incurred; and
  •     a copy of any relevant contract (these do not need to be signed).

The application should give sufficient information to show how any figures have been calculated.

Has my application been successful?

If your application is successful, the Foreign Entertainers Unit will send you a form FEU 4. This is your confirmation that you can pay a reduced level of withholding tax. Please note that no reductions from the standard rate of 20% can be made until a form FEU 4 has been received.

How long does it take the Foreign Entertainers Unit of HMRC to process my application?

The Foreign Entertainers Unit has indicated that they generally hope to process applications within 30 days. However, this is not guaranteed and, at certain times of year such as Christmas and during the festival season, applications can take longer than 30 days to process.

A timely application is therefore recommended.

If you have any further questions or queries then please feel welcome to contact Mark Roberts on 0161 826 9309.

Please note that the information in this post is general information only. It is not intended to be relied upon as a substitute for independent legal or accounting advice. Please consult your lawyer or accountant for advice based on your particular circumstances.

Withholding Tax, Tour Promoters & Overseas Artists

Live guitarist on stage

Every promoter will be aware of the necessity to carefully identify all income and expenditure associated with a tour. Relatively small and unexpected changes can make the difference between a profitable tour and a loss-maker. Accurate financial planning also allows the promoter to calculate attractive levels of guarantee and gauge the fixed percentage to be paid to the artist. With this in mind, withholding tax, at 20%, can punch a huge hole in your financial planning. The deduction of withholding tax may also come as a surprise to the non-resident artist, whose enthusiasm for any upcoming tour may be depleted on learning of this unexpected deduction.

The Basics

As a rule of thumb, withholding tax must be paid by anyone who makes a payment to a non-resident artist for any UK appearance. There are some exceptions, but they are limited. Payment includes not only cash, but also expenses paid on behalf of the artist such as airfares or the cost of hotel accommodation.

Withholding tax is paid at the current UK basic rate. At the date of writing (January 2013) this is 20%.

Example 1: A non-resident artist appears at the O2 Apollo in Manchester. The venue is obliged to pay all box office receipts to the artist. The total value of box office receipts is £150,000. The venue pays the artist £150,000 less £30,000 tax = £120,000.

Withholding tax must be paid not only on direct income such as guarantees and any agreed share of box office receipts, but also on indirect sources of income such as merchandising and endorsements.

Example 2: Marshall pays you a £10,000 endorsement fee to use their amps on a UK tour.

Even those that indirectly make payments to a non-resident artist must account for withholding tax. So, for example, a venue paying over monies to a promoter must first deduct withholding tax from those monies. The promoter, in turn, must also account for withholding tax.

Example 3: A Promoter engages a non-resident artist to appear at the Roundhouse.

The Roundhouse pays £75,000 less £15,000 tax to the Promoter.

The Promoter pays £40,000 less £8,000 tax to the artist.

The Promoter is liable to account to HMRC for £8,000 but as the payment he has received has had £15,000 withholding tax deducted from it he can treat the £8,000 as paid. This assumes the artist is the only non-resident artist the promoter engages in that tax quarter.

Are there any exemptions?

Yes. Withholding tax does not apply to payments:

  • made in respect of copyright, royalties or advances on royalties.
  • made direct to an entity for ancillary services. These include security, venue hire, equipment hire and ticket printing.
  • made to an entertainer for record sales where the payment is either:
    • based on the proceeds of sales;
    • a non-returnable advance on account of future sales;or
    • sales at a live performance.
  • equal to or less than the UK personal allowance for that year (currently £8,105 for the 2012/13 tax year).

Can I reduce the amount of withholding tax?

Yes. You can apply to the Foreign Entertainers Unit of the HMRC to deduct an amount other than the 20% basic rate of tax. To do so, you will need to demonstrate to HMRC that the final liability of the artist to UK tax will in reality be lower than the blanket 20% basic rate of tax. For example, you may be able to agree that the very considerable expenses associated with touring will substantially diminish the income of the artist.

HMRC generally accepts that the following expenses may be deducted from gross income, resulting in quite substantial decreases in the amount of withholding tax that needs to be paid:

  • general subsistence expenses;
  • commission, manager’s and agent’s fees;
  • UK travel; and
  • international air fares to and from the UK where the artist comes to the UK to perform and returns directly to their home country.

Other expenses may be deductible depending on the individual circumstances of the artist.

For further details on how to make an application, please click here.

How and when do I have to pay withholding tax?

You need to pay any tax due to the Foreign Entertainers Unit within 14 days after the end of the return period in which the payment was made. The return periods are 30 June, 30 September, 31 December and 5 April.

You report the amount of withholding tax payable to the Foreign Entertainers Unit by completing Form FEU 1 before the end of the return period.

Making a payment to a non-resident artist

When you make a payment to a non-resident artist, you will need to complete Form FEU 2. This comes in 3 parts.

  • Part 1 : This should be sent the HMRC’s Accounts Office at Shipley together with your form FEU 1.
  • Part 2 : You keep Part 2 for your records.
  • Part 3 : You give this to the artist as a certificate of the payment made and tax withheld.

Finally…

If you are not yet registered with the Foreign Entertainers Unit then call them on 0151 472 6488 to request a Starter Pack. This contains helpful information and all the forms you will need.

When booking venues, check their policies as regards withholding taxes. All venues should deduct withholding taxes. Ensure you receive Part 3 of Form FEU 2 from the venue so that you can pass this on to your artist.

If you have any further questions or queries then please feel welcome to contact Mark Roberts on 0161 826 9309.

Please note that the information in this post is general information only. It is not intended to be relied upon as a substitute for independent legal or accounting advice. Please consult your lawyer or accountant for advice based on your particular circumstances.