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Sir Fergus Montgomery (Altrincham and Sale) : I am grateful to my hon. Friend the Member for Hazel Grove (Mr. Arnold) for allowing me to take part in his Adjournment debate. My hon. Friend's father was a distinguished impresario. When I was young I used to go to the Empire theatre in Newcastle upon Tyne. It was a variety theatre, with once-nightly productions that were invariably "Tom Arnold presents" productions. That was always a sign of class and of a good show. The theatrical profession is insecure. If one is a Laurence Olivier, or a John Gielgud, or an Alec Guinness, one will have a marvellous time, be at the top of the bill, have one's name above the title of the play and earn a great deal of money. However, there is a higher percentage of unemployment in the theatrical profession than in any
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other occupation. The Inland Revenue's proposal that actors and actresses should be taxed under schedule E is causing great concern. Traditionally, they have been taxed under schedule D.My hon. Friend emphasised that, under schedule E, allowable expenses are those that are incurred wholly, exclusively and necessarily in the performance of the employment. Actors and actresses incur considerable expenses that would not be allowable under such a definition. The agent's fee would not be allowable. An actor or actress needs an agent to get a job. I believe that the agent's fee is still 10 per cent. of earnings. Touring and living expenses would not be allowable.
The theatre does not depend just on the west end. We have a thriving provincial theatre. My hon. Friend and I represent constituencies near to Manchester, and we believe that Manchester stages the best theatrical events outside London. Actors and actresses appear there in touring productions and give a great deal of pleasure.
The Equity subscription would not be allowable, either. Unless actors and actresses are Equity members they cannot get a job. Furthermore, there are audition expenses. Auditions are compulsory before anybody is given a part in a production. Then there are telephone calls, postage, stationery and make-up expenses. All those are essential tools of the trade.
I hope that when my hon. Friend the Financial Secretary replies to the debate he will say that common sense will prevail and that the Inland Revenue will have a change of heart.
11.59 pm
The Financial Secretary to the Treasury (Mr. Peter Lilley) : I congratulate my hon. Friend the Member for Hazel Grove (Mr. Arnold) on securing the debate and my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery) on his contribution. It is often thought that the House consists exclusively of merchant bankers and polytechnic lecturers, but it is valuable that we include hon. Members with the experience of theatrical production of my hon. Friend the Member for Hazel Grove and the experience of my hon. Friend the Member for Altrincham and Sale from the other side of the footlights. I welcome the fact that they have raised this important matter today.
The issue at stake is the standard Equity contract and whether those engaged under it are employed or self-employed. That is essentially a matter of law and not, as some people imagine, a matter of choice. People do not have the right to choose whether they are self-employed or employed. Nor is it a matter of the Revenue making its own judgments. The Revenue simply applies the law as it sees it and as it has been established by the courts. It applies a number of tests.
As my hon. Friend said, the main court case involving the theatrical profession was in 1972. It is a long time since that ruling, which was a clear one but still has not been fully implemented. There was a period of waiting for Equity to appeal, as it was a test case, but eventually in 1975 it chose not to do so. Subsequently, there was a period of negotiation. Instructions were sent out, but I understand that the new treatment was only patchily applied. Subsequently Equity discovered the inconsistencies and there were complaints, further discussions and negotiations. More recently, the final decision has been taken to apply the law, but only gradually and with
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transitional arrangements. The transitional arrangements mean that those who have an established record of working under contract in the theatrical profession and have been taxed as self- employed will be able to retain that tax status. The new status will apply only to newcomers to the profession who do not have that established record. Over a generation it will come in fully. The Revenue has been endeavouring to establish with Equity those who will be the beneficiaries of the right to remain treated as self-employed. The Revenue has stated that if Equity wishes to bring in another test case, it would be happy to co-operate to discover whether a different interpretation of the law was possible if Equity believes that the 1972 case is out of date, circumstances have changed or things were not properly considered on that occasion. The Inland Revenue has thus shown a clear willingness to apply the law as flexibly as it is empowered to do and to co-operate as closely as possible with the theatrical profession.One of the principal issues at stake is that of expenses, as my hon. Friend said, and most particularly the agent's fee. He was right that the Inland Revenue told Equity that it was open to suggestions as to how expenses might be treated in a way which would mean that they had to be paid out of taxed income. The theatre employers and Equity said in November that they were considering the Revenue's suggestions that the present contractual arrangement used be revised. They told the Revenue that they might have some legal difficulty with that--perhaps the legal difficulty to which my hon. Friend referred--but that they were still considering it. They have not yet returned to the Revenue on that, nor suggested what legal difficulities they are examining, but the Revenue remains available to discuss their problems.
The fact that employment agencies are prohibited by law from charging an individual an agency fee does not mean that those who are not forbidden by law are compelled to do otherwise, but there are doubtless people in Equity and the Revenue better placed than I am to discuss such legal matters.
It has been suggested that we should legislate to determine specifically that members of the acting profession be treated as self-employed and not subject to PAYE. Unfortunately, many other groups believe that they are special cases--sometimes for reasons similar to those given by the acting profession and sometimes for reasons unique to their own circumstances. Once one started doing that, one would be on the slippery slope of determining by law where each profession stands on employment and self- employment. It is better to leave it to the general rule and to the case law that has developed as that general rule has been applied.
For national insurance purposes, actors have managed to retain employed status, which is advantageous because, unfortunately, unemployment affects many actors for significant periods. They would not wish to lose that status. I do not think that the issue can be settled by changing the law specifically for the acting profession. I hope that the discussions between Equity and the Revenue will find some way of softening the treatment of what at present are expenses by recasting them in a way
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that will comply with the law and will mean that they are not expenses. If it is possible to make progress on that, no one will be happier than I.I have listened carefully to the comments of both my hon. Friends and I shall reflect further on them when I discuss
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these matters with the Revenue. I hope that I have done my best to explain how this development occurred and to convince them that we are anxious to be as co-operative as possible.Question put and agreed to.
Adjourned accordingly at seven minutes past Twelve o'clock.
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