How does a jolly story about Bill avoiding tax deduction at source for a UK speech fee have relevance for advertisers?
Who: Bill Clinton
When: June 2001
HM Inspector of Taxes was in a quandary. Was Bill Clinton’s highly paid star speech at Harrogate’s annual International Business Convention the work of an entertainer or a statesman? It made a big difference. A 22% difference to be precise, as it was this proportion of Clinton’s fee that would have to be deducted as "withholding tax" before his fee was paid if the ex-President was to be classified for these purposes as an entertainer.
Not a penny would have to go to the UK taxman if Clinton was speaking as nothing more than a politician, and it was a happy ending for Clinton as eventually, after four weeks’ deliberation, Inland Revenue Solihull informed the Convention organisers that withholding tax was not appropriate.
Why this matters:
There is a lesson here for advertisers and their agencies paying fees to performers who are not resident in the UK, but fly in for a commercial shoot. The default approach to payment of the performer’s fees in these cases must be to deduct tax at the basic rate before handing over the fee. If the performer believes the fee should not be subject to tax at this rate he can claim it back later. Performer contracts should make it clear that this approach will be adopted, and another thing: when shooting in the US don’t forget Screen Actors’ Guild deductions, which should also be made at source.