[2010] UKFTT 586 (TC)

	TC00836

Appeal number: TC/2009/10166

National Insurance Contributions – categorisation of earners – entertainers – whether actors outside provision treating self-employed entertainers as employed earners within Class 1 – whether actors in receipt of “salary” as defined – whether different from “walk-ons” – decision in principle on position under various forms of contract

FIRST-TIER TRIBUNAL

TAX 

	ITV SERVICES LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	JOHN CLARK (TRIBUNAL JUDGE)							TYM MARSH		

Sitting in public at 45 Bedford Square, London WC1 on 26-29 July 2010

David Goldberg QC, instructed by Berwin Leighton Paisner, for the Appellant

Malcolm Gammie QC, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	ITV Services Limited (“ITV”) appeals against three determinations made by the Respondents (“HMRC”) on 7 April 2009. These relate respectively to three periods, namely the period of just over four months from 1 December 2006 to 5 April 2007, the year to 5 April 2008 and the year to 5 April 2009. Each determination states that certain entertainers are to be treated as employed in employed earner’s employment, and that ITV is treated as liable to pay secondary Class 1 National Insurance Contributions (“NICs”) in respect of the earnings of those entertainers. ITV seeks a decision in principle as to whether payments to actors computed in the ways described in its evidence were “salary” as defined in the relevant legislation with effect from 6 April 2003.
The statutory background
2.	In order to consider the particular statutory provisions which need to be construed as part of the process of determining the appeal, it is necessary to explain the history of those provisions, as was done by both Mr Goldberg and Mr Gammie in putting the parties’ arguments to us.
The pre-1998 position
3.	In a reply in July 1998 to a Parliamentary question reproduced in  a Press Release dated 15 July 1998, the Social Security Minister said:
“Performers have generally been treated as self-employed by the Inland Revenue, but as employees for National Insurance purposes. We have received legal advice that the current National Insurance treatment is not sustainable, and that entertainers should generally be regarded as self-employed.
Having considered the position we have decided to table regulations that will again require the majority of performers to be treated as employees for National Insurance purposes, whose earnings will be liable to Class 1 contributions. These regulations will be tabled in the near future.”
The Notes to the Press Release referred to a decision of the Special Commissioners in 1993 relating to the income tax treatment of actors under standard Equity contracts (this being the case of McCowen and West, which preceded the publication of decisions of the Special Commissioners).
The position from 1998 to 2003
4.	With effect from 17 July 1998, the Social Security (Categorisation of Earners) (Amendment) Regulations 1998 inserted a new paragraph 5A into Schedule 1 to the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689) (we refer to this statutory instrument as “the Categorisation Regulations”). Pursuant to regulation 2(2) (of which the later revised version is set out below) an earner is to be treated as an employed earner if he falls within the relevant paragraph of column (A) and is not a person specified in the corresponding paragraph of column (B).
5.	Paragraph 5A in Column (A) of Schedule 1 to the Categorisation Regulations was as follows:
“5A. Employment as an entertainer, not being employment under a contract of service or in an office with emoluments chargeable to income tax under Schedule E.”
6.	Paragraph 5A in column (B) of Schedule 1 was worded:
“5A. Any person in employment described in paragraph 5A in column (A) whose remuneration in respect of that employment does not consist wholly or mainly of salary.”
7.	Although these amendments were initially due to expire on 31 January 1999, their validity was extended by a further statutory instrument.
The position from 2003 onwards
8.	The effect of paragraph 5A of column (A) of Schedule 1 to the Categorisation Regulations remained the same, although a minor amendment to the wording was subsequently made with effect from 6 April 2004:
“5A. Employment as an entertainer, not being employment under a contract of service or in an office with general earnings.”
9.	As the scope and effect of paragraph 5A of column (B) of that Schedule had not proved to be as expected, for the reasons which we explain later in this decision by reference to information published by HMRC, it was replaced with effect from 6 April 2003 by the following:
“5A. Any person in employment described in paragraph 5A in column (A) whose remuneration in respect of that employment does not include any payment by way of salary.
For the purposes of this paragraph “salary” means payments—
(a) made for services rendered;
(b) paid under a contract for services;
(c) where there is more than one payment, payable at a specific period or interval; and
(d) computed by reference to the amount of time for which work has been performed.”
10.	The wording of regulation 2(2) was amended in a minor respect with effect from 6 April 2004:
“(2) Subject to the provisions of paragraph (4) of this regulation, every earner shall, in respect of any employment described in any paragraph in column (A) of Part I of Schedule 1 to these regulations, be treated as falling within the category of an employed earner in so far as he is gainfully employed in such employment and is not a person specified in the corresponding paragraph in column (B) of that Part, notwithstanding that the employment is not under a contract of service, or in an office (including elective office) with general earnings.”
Other relevant statutory provisions
11.	The primary legislation relevant to the issue in this appeal is contained in the Social Security Contributions and Benefits Act 1992 (“SCCBA 1992”). Section 2 SSCBA 1992 provides:
“2 Categories of earners
(1)     In this Part of this Act and Parts II to V below—
	(a) “employed earner” means a person who is gainfully 	employed in Great Britain either under a contract of service, or 	in an office (including elective office) with general 	earnings; and
	(b) “self-employed earner” means a person who is gainfully 	employed in Great Britain otherwise than in employed earner's 	employment (whether or not he is also employed in such 	employment).
(2)     Regulations may provide—
	(a) for employment of any prescribed description to be 	disregarded in relation to liability for contributions otherwise 	arising from employment of that description;
	(b) for a person in employment of any prescribed description 	to be treated, for the purposes of this Act, as falling within one 	or other of the categories of earner defined in subsection (1) 	above, notwithstanding that he would not fall within that 	category apart from the regulations.”
The relevant parts of the Categorisation Regulations were made pursuant to what is now s 2(2) SSCBA 1992.
12.	Liability in respect of secondary Class 1 contributions is imposed under regulation 5(1) of the Categorisation Regulations, made pursuant to what is now s 7(2) SSCBA 1992. Regulation 5(1) provides:
“(1) For the purposes of section 4 of the Act (Class 1 contributions), in relation to any payment of earnings to or for the benefit of an employed earner in any employment described in any paragraph in column (A) of Schedule 3 to these regulations, the person specified in the corresponding paragraph in column (B) of that Schedule shall be treated as the secondary Class 1 contributor in relation to that employed earner.”
13.	Paragraph 10 of Column (A) of Schedule 3 to the Categorisation Regulations is as follows:
“10. Employment as an entertainer (not being employment under a contract of service or in an office with general earnings) except where the earner is a person to whom paragraph 5A in column (B) of Schedule 1 to these Regulations applies.”
14.	The corresponding paragraph of Column (B) of Schedule 3 lists, as the person treated as the secondary Class 1 contributor:
“10. The producer of the entertainment in respect of which the payments of salary are made to the person mentioned in paragraph 5A of Column (B) of Schedule 1.”
The background facts
15.	In addition to the basic bundle of documents, the evidence consisted of witness statements made by David Wolffe, Filip William Cieslik and Peter James Bain. Mr Wolffe was not required to give oral evidence. Substantial documentation was exhibited to the statements of Mr Cieslik and Mr Bain, both of whom gave oral evidence. From the evidence we find the following facts. Where issues were disputed or relate to matters of legal argument, we consider the relevant facts at a later stage in this decision.
16.	Mr Wolffe stated in his evidence that ITV [ie the Appellant] is a subsidiary of ITV plc, and that as he understood the position, the Appellant is the Group Representative Member for Corporation Tax, VAT and PAYE matters and has been accepted by HMRC in those areas. Mr Wolffe did not specify the basis for the Appellant’s representation of the Group for NIC purposes, but before us the parties accepted without detailed explanation that ITV, the Appellant, should be treated as representing the ITV plc Group for these purposes also. We therefore adopt the position as accepted by the parties, and treat this appeal as determinative (in principle) of the NIC liabilities of all companies within the ITV plc Group in respect of the entertainers covered by the determinations.
17.	Neither Mr Cieslik nor Mr Bain could recall the position of payments by ITV to actors before the original change to the Categorisation Regulations had been made in 1998. Under the regime which had applied from July 1998 until April 2003, ITV had withheld employer’s (ie secondary) Class 1 NICs in respect of payments to actors. Mr Cieslik explained that this had been because of the uncertainty of interpretation of the Categorisation Regulations; he stated that ITV’s position had been confirmed to be correct in 2003 when the Categorisation Regulations were changed and the accrual was released into ITV’s accounts.
18.	From April 2003 until 30 November 2006, ITV accounted for both primary and secondary Class 1 NICs in relation to various categories of entertainers, primarily actors, under the relevant statutory provisions. In December 2006 ITV ceased to account for secondary NICs in respect of the entertainers, although it continued to deduct and account for primary Class 1 NICs.
19.	The entertainers were engaged under a variety of contracts. These were listed in ITV’s Statement of Case as falling broadly within six categories:
(1)	Bespoke agreements;
(2)	The ITV/Equity Form of Engagement;
(3)	The PACT/Equity Form of Agreement;
(4)	“All Rights” agreements;
(5)	“Memo” fees;
(6)	“Walk-ons”.
20.	ITV pointed out that in some cases, the contracts falling with category (2) above incorporate the terms of the ITV/Equity Minimum Rates Collective Agreement (the “ITV/Equity Main Agreement”) and the contracts falling within category (3) incorporate the terms of the PACT/Equity Collective Agreement (the “PACT Main Agreement”). These are together referred to where appropriate as the “Main Agreements”.
21.	For each of the categories other than (5), ITV provided a sample agreement, with variants as relevant. The contracts in evidence are anonymised, so that no reference need (or even can) be made to any particular individual. So far as possible, in order to protect ITV’s commercial position as well as that of the unnamed actors concerned, we attempt in this decision to avoid any reference to the actual amounts contracted to be paid by ITV to any particular entertainer.
22.	We consider the terms of the sample agreements later in this decision, in the context of the effect of the Categorisation Regulations, but they can be summarised as follows. In respect of the services required, the entertainers engaged by contracts falling within categories (1)-(4) above were required to provide specific acting and performance services requiring special skill, creative and artistic ability, or to make themselves available to provide such services whether they were actually provided or not. The entertainers falling within category (5) were asked to carry out specific tasks ancillary to their acting and performance services. The entertainers falling within category (6) did not provide acting and performance services which required special skill, creative and artistic ability, as they were required to be present for scenic, decorative and background purposes only, or to make themselves available for such services whether or not they were actually provided.
23.	The Bespoke Agreement provides for the payment to the entertainer of a single, all-inclusive fee in respect of his engagement to perform the specific services or to make himself available to do so, for a specified period of engagement. It expressly excludes all the terms of the Main Agreements.
24.	Category (2), the ITV/Equity Form of Engagement, provides for the payment of a programme fee in respect of a certain period of engagement, and/or a guaranteed programme fee per episode. It also provides for further future fee payments to be made for post-synchronisation work carried out by the entertainer following the completion of the period of engagement, such work constituting an engagement separate from the programme fee. It effectively incorporates the terms of the ITV/Equity Main Agreement; the latter provides for an entitlement to payment for attendance days, production days, standby days and where the entertainer provides services for a “seventh day and overtime”.
25.	Category (3), the PACT/Equity Standard Form of Engagement, provides for the payment of an engagement fee in respect of a certain period of engagement, a production day fee for the days on which the entertainer is required to be available to provide performance services, the payment of which is to be made irrespective of whether the entertainer is actually called on to render such services, and a rehearsal fee for the days on which the entertainer is required to render services for rehearsal prior to the first day of principal photography. The agreement effectively incorporates the terms of the PACT Main Agreement which provides for an entitlement to the payment of overtime where the entertainer provides services in excess of “nine over ten hours”.
26.	Category (4), the “All Rights” agreement, provides for the payment to the entertainer of a single, all-inclusive fee in respect of his engagement to provide specific services for a specified period of engagement, and does not incorporate the terms of either the ITV/Equity Main Agreement or the PACT/Equity Collective Agreement.
27.	Category (5), Memo fees, apply to entertainers in respect of specified services which are ancillary to their acting and performance services, such as attending a costume fitting; they are not governed by formal agreements.
28.	Under category (6), walk-ons are engaged pursuant either to the ITV/Equity Standard Form of Engagement for Walk-Ons or to the PACT/FAA Standard Form of Engagement for Walk-Ons. The former contains limited terms which include a brief description of the name and other personal details of the walk-on, the services required and the start and finish times on set; it provides for the payment to the walk-on of a single fee in respect of the latter’s engagement to perform the services required of a walk-on on the specified day. The PACT Form also contains limited terms which include a brief description of the name and other personal details of the walk-on, the services required and the start and finish times on set; it provides for the payment to the walk-on of a fee, the rate of which varies according to the date and time of day worked.
29.	In respect of each of the contracts falling within categories (1)-(5) above, the fees to be paid to the entertainers in relation to the specified periods were computed by reference to the following factors:
(1)	the budget for the relevant production;
(2)	the duration of the relevant production;
(3)	the period of engagement;
(4)	the number of episodes to be broadcast;
(5)	the duration of each episode;
(6)	the status and profile of the entertainer within the public domain;
(7)	the skill, expertise and reputation of the entertainer within the industry;
(8)	the size and complexity of the role;
(9)	the nature of the relevant production;
(10)	the future broadcasts of the relevant production.
30.	In its Statement of Case, ITV described in broad terms as follows the process for the computation and final determination of the fees:
(1)	The budget for the production is initially explored following discussions between a writer and a Creative Executive within ITV.
(2)	The next step is for the Controller of Business Affairs to source funding for the production, which in turn informs the determination of the budget for the production by the Head of Production and the Production team.
(3)	Depending on the funding which is obtained and the consequent size of the budget, the First Assistant Director determines a schedule for the shooting of the production.
(4)	Once the schedule is determined, a cast budget is allocated to a Director and/or a Casting Director. He considers which entertainers to engage and in respect of which roles, such engagement to be within the time periods set out in the schedule for the production and the remuneration of the entertainers to be within the parameters of the budget. In particular he will consider engaging entertainers who provide specific acting and performance services, and/or consider engaging entertainers who do not provide such services, ie walk-ons.
31.	The principal distinction is between entertainers falling within categories (1)-(5) above, ie those required to provide specific acting and performance services requiring special skill, creative and artistic ability, and those falling within (6), described as “walk-ons” (often referred to in the past as “extras”). Mr Bain stated in his evidence that in contrast to actors, such characteristics were not required for walk-ons’ services. We refer to the former as “actors” and to the latter as “walk-ons”. In respect of actors, discussions take place between the Casting Director or other member of the ITV creative team and the agent representing the actor. These are with a view to engaging the actor under the relevant form of contract. The discussions include an initial offer of fees payable to the actor. The relevant factors taken into account in those discussions are those referred to above at paragraph 29(3)-(10), as well as the scale of the production, and the actor’s “going rate” (which may be based by the agent on the fee for a previous engagement with ITV). The discussions take place in advance of any services being provided by the actor pursuant to the contract eventually concluded between the actor and ITV.
32.	The fees payable to walk-ons are not determined by reference to the factors applicable to actors. Instead they are computed and paid in accordance with the published rates for walk-ons. They are not negotiated between the Casting Director and the individual walk-on. ITV accepts that the fees payable to walk-ons are salary within the definition in paragraph 5A of column (B) of Schedule 1 to the Categorisation Regulations.
33.	The timing of payment of fees to actors is a relevant factor in relation to the issue in this appeal, and is considered below in that context.
34.	In respect of each of the sample agreements within categories (1)-(5) in paragraph 19 above, ITV made payment to the actors of the fees calculated in accordance with the factors described above.
35.	In respect of the ITV/Equity Form of Engagement, ITV made payments of post-synchronisation fees in accordance with the terms of that separate engagement.
36.	In respect of the ITV/Equity Form of Engagement and the PACT/Equity Standard Form of Engagement, ITV made payments of overtime only when claimed by the entertainers (approximately 15 per cent of those engaged during the relevant periods).
37.	On 7 April 2009 HMRC issued three determinations to ITV for the years 2006-07, 2007-08 and 2008-09 respectively. The total amount of those determinations was substantial, but as the decision which ITV has requested us to make is in principle only, we do not consider it appropriate to refer to the amounts in this decision.
38.	On 30 April 2009 ITV appealed against the determinations made by HMRC.
Arguments for ITV
39.	Mr Goldberg explained the history and effect of the legislation. If the actors were in receipt of any payment by way of “salary”, as defined, they were to be treated as employed earners, but so long as their remuneration did not include any payment by way of salary, they were excluded from the category of earners treated as employed, and remained self-employed earners.
40.	ITV’s case was that the actors’ remuneration did not include any payment by way of salary; HMRC claimed that it did.
41.	There was a significant difference between the general, undefined meaning of salary and the meaning of salary as it was now defined for the purposes of paragraph 5A of column (B) of Part 1 of Schedule 1 to the Categorisation Regulations. The main difference was that any payment computed by time could be salary for general purposes, but that since the amended legislation had come into effect only payments computed by reference to the amount of time for which work had been performed were salary [his emphasis]. Payment by time for the performance of work done had accordingly become essential to the existence of salary for the purposes of that paragraph 5A.
42.	Mr Goldberg referred to the purpose of the legislation. Entertainers were generally self-employed, but many of them struggled to get work. If a vibrant theatre was to be maintained in the UK, some entertainers would need help. The decision in 1998 had been that the help to appropriate to certain entertainers was that they should be able to get the state benefits appropriate to employees even though they were self-employed. The position continued to be the same.
43.	Once it had been decided that certain entertainers needed help, a basis had to be found to ensure that the benefits which were to be provided were directed towards those entertainers who needed them. It was necessary to define the class of entertainer who was to be able to benefit, and the category “struggling entertainer”, while it would have precisely identified the aim of the legislation, was clearly too broad and too imprecise a definition to be workable. What was required was a test which enabled a person who was able to benefit from being treated as an employee to be identified in some reasonably objective way, so that whether or not a person was entitled to that treatment could be determined with relative ease.
44.	The test originally adopted had been one linked to the idea that a struggling self-employed actor would be paid in a way which would have some similarities to the way in which an employee would be paid. Thus, originally, all that an entertainer had to do to be eligible for employee benefits was to show that he was paid by time and that the contract for his work had some element of recurrence. It followed that an entertainer was, originally, eligible for treatment as an employee if he could show that the payment to which he was entitled operated, as HMRC had put it in their Statement of Case, “to buy the individual’s time during which he can be called upon to perform services”.
45.	However, it was apparent that this definition of when a self-employed entertainer was to be eligible for treatment as an employee had been wholly inadequate. Many successful entertainers who had no need whatever for state benefits were paid for being available to work, rather than working, and it was (and would be) quite wrong for such individuals “accidentally” to become eligible for state benefits. Further, many if not most struggling entertainers were given serial one-off jobs, the pay for which had no element of recurrence, so that they were regarded as not receiving salary and thus not eligible for state benefits even though they were clearly intended to be the prime beneficiaries of the Categorisation Regulations. The original form of paragraph 5A in Column (B) of Schedule 1 had been wrongly targeted. The approach taken in the 1998 amendments to the Categorisation Regulations had been unsatisfactory, partly because it excluded walk-ons on the basis that there was no element of recurrence as required in Greater London Council v Minister of Social Security [1971] 2 All ER 285 (which we refer to as the “GLC case”) and also because it did not apply to actors who were entitled to payments which were in the main not salary at all.
46.	The errors in the formulation of the original paragraph 5A had been put right by the change made in 2003. The change made was to the definition of salary. A payment could now be salary even if it had no element of recurrence. Most important of all, a payment which bought an individual’s time during which he was available to undertake regular work was no longer salary: a payment would only be salary where it was (among other things) “computed by reference to the amount of time for which work has been performed”, as specified in sub-paragraph (d) of paragraph 5A. On the whole, “unsuccessful” actors had their pay computed in that way. As explained in the witness statements of Mr Cieslik and Mr Bain, more “successful” actors did not have their pay computed in that way.
47.	Thus a payment which bought an individual’s availability was originally salary, but this was no longer the case. Under the current form of paragraph 5A, if a payment was to be salary, it must be computed by reference to the time for which work had been performed. In other words, to be salary, the pay must now be closely linked to work done, and that meant that it would usually be calculated after the work had been performed: conversely, a payment was not salary if it was for being available to work, or if it was calculated by reference to work expected to be done. It followed that a hallmark of a payment which was not salary was that it was negotiated, agreed and fixed before any work had been performed, which was how payments to the actors were arranged.
48.	The present definition of “salary” in the Categorisation Regulations was not derived from case law but replaced it, so that no inferences could be drawn from what the case law had said about the meaning of salary. Paragraph 5A(d) must impose a different test of what was salary from the test based on common law, so must be interpreted on the former’s terms rather than the latter. There was a difference between “computed by time” as considered in Re Shine, Ex parte Shine [1892] 1QB 522 and the reference in paragraph 5A(d) to “the amount of time for which work has been performed”. Little reference had been made to the question of time in the cases cited in HMRC’s skeleton argument; the only mention of time had been in the GLC case and Re Shine.
49.	The definition of salary now precisely targeted the availability of state employee benefits and gave them to relatively unsuccessful entertainers. Entertainers who, like the actors, were successful were not eligible for the benefits. ITV accepted that in general the National Insurance scheme was not concerned with whether or not benefits were needed, but in the special case of entertainers that was exactly what the legislation was concerned with, ie the provision of benefits for entertainers where their circumstances required this.
50.	ITV’s case was that actors were paid for being available to work, the time (if any) taken into account in agreeing a fee being time for which work was expected to be performed rather than time for which work had been performed. Payments made to actors were accordingly no longer salary as defined and actors were not eligible for state employee benefits. ITV’s central submission was that where a contract provided for a fixed fee payable regardless of how much work was actually performed by the actor, the remuneration in respect of the employment did not include any payment by way of salary.  That was the case even if one of the factors that went into the computation of the fee was the length of the period of engagement.
51.	In response to HMRC’s claim that the payments to actors were salary, Mr Goldberg referred to the opening words of paragraph 21 of HMRC’s Statement of Case:
“Any contract that incorporates the Equity Minimum Rate Agreement will include a payment to engage the entertainer for a specified period of time during which the entertainer can be called upon to provide his services for the production in question.”
Subject to the provisions of the particular contracts entered into by the actors (which might and often did override the terms of the Equity Minimum Rate Agreement) and in the light of the detailed evidence of Mr Cieslik and Mr Bain, ITV agreed with that statement: actors were paid primarily for being available; their fees were negotiated and agreed up front and were not computed by reference to time worked.
52.	HMRC had gone on to conclude from their above statement that ‘As such the contract includes a payment “by way of salary” for these purposes.’ Mr Goldberg argued that this conclusion did not follow from that statement. It would have done so if paragraph 5A of column (B) had not been changed in 2003. The result of the change made, bringing in sub-paragraph (d) of the definition, was that HMRC’s statement now led to the opposite conclusion to that arrived at by HMRC. If the actors were paid to engage them for a period of time during which they could be called upon to provide services, the computation of their remuneration was not by reference to the time for which work had been performed and they were not getting payments by way of salary. As a result they were not to be treated as employed earners and ITV was not the secondary contributor.
53.	It was clear from the phrasing of HMRC’s “Guidelines on the Special Rules for Entertainers” (which we refer to as the “Guidelines”) at Section A, paragraph 6 that the width that HMRC now claimed for the definition of “salary” was just not there because there was a contrast within that paragraph between the time worked and the period of engagement. It was not appropriate to say that a fee which was computed “up front” by reference to the period during which the artist was to be required to be available to do work but which was not the period for which the artist would be or had to be working, was computed “by reference to the amount of time for which work has been performed”. The amount of work which the actor would actually do in the period of engagement was not known when the fee was computed.
54.	Mr Goldberg argued that the reference in the Guidelines to payment being “computed by reference to time worked” was wrong as a summary of the definition of salary derived from case law. The description of the Categorisation Regulations as altered from 2003 onwards was also incorrect; it referred to the link between the fee paid and the number of days worked (which he accepted was correct) or between the fee and “the period of the engagement, (whether or not there is a contractual requirement for work to be performed on each and every day)”. He contended that this disregarded the words used in paragraph 5A(d), as this was not “computed by reference to the time for which work has been performed”, but was merely computed by reference to the (or an) amount of time. The condition in paragraph 5A(d) was very tightly linked to the performance of work. There was a contrast between the time worked and the period of engagement. The main battleground in this case was whether HMRC’s reference to the period of engagement was correct. The major issue was whether the period for which the artist held himself available to do work was the same as the time for which work had been performed.
55.	It was at least possible that the Categorisation Regulations as amended in 2003 were not necessarily targeted in the way HMRC believed them to be targeted. There was no reason to suppose that all entertainers must fall within the scope of the “salary” provision in paragraph 5A of column (B) so as to bring them within the category of employed earner. It was clear from the Guidelines that some entertainers could take themselves outside that provision by being paid a fee for the production, and not a “salary”. As the Categorisation Regulations were plainly intended to benefit the entertainers and not HMRC, they should not be interpreted in a “catch all” way but in a way which fulfilled their purpose of giving some entertainers a safety net and leaving relatively high flyers who did not need the safety net without it.
56.	Mr Goldberg pointed out that the Guidelines were different for session musicians and their deputies; HMRC indicated that such entertainers would not fall under the 2003 Regulations. The basis for this policy was not to be found in the Categorisation Regulations. ITV believed that the contracts which session musicians entered into were very similar to those which ITV entered into with the actors working for it. HMRC should recognise that some people were receiving fees, and that ITV’s actors were paid fees and not salary.
57.	On behalf of ITV, Mr Goldberg accepted that walk-ons did receive “salary” as currently defined in the Categorisation Regulations. (On the final day of the hearing, he considered whether that concession should not have been made, but confirmed in closing that it was not being withdrawn.) Payments to walk-ons were computed by reference to the time for which work was performed. He contended that entertainers who were of the kind who might be described as “struggling” or who, like walk-ons, were not successful actors, were not like the majority of actors whose position was in question in the appeal; those in the two former categories were clearly intended to be among the chief beneficiaries of the regime brought in by the Categorisation Regulations.
58.	The difference between the way in which the fees of unsuccessful actors and walk-ons were computed marked the difference between successful and unsuccessful entertainers. A successful entertainer was in demand and could require payment not for working but simply for being available. A struggling entertainer could only secure payment for the work which he had done. The distinction which ITV drew between unsuccessful entertainers (and walk-ons) on the one hand and actors on the other was entirely in accordance with the difference mentioned, and was thus entirely in accordance with the Categorisation Regulations. He argued that the purpose of the Categorisation Regulations was to give entitlement to universal contributory benefits. The Categorisation Regulations were not a revenue-raising measure, but a measure designed to protect resting actors from penury.
59.	On ITV’s interpretation, the Categorisation Regulations fulfilled their purpose by recognising that entertainers with fixed fee arrangements were likely to be those in regular work who did not need universal benefits, and ensuring that those not in regular work and who did need universal benefits could ensure that their pay was computed in such a way that it was salary.
60.	ITV sought a decision in principle as to whether payments to actors computed in the ways described by Mr Bain in his evidence were salary as defined in the Categorisation Regulations with effect from 6 April 2003.
61.	ITV submitted that on the evidence the payments to actors who were not walk-ons were not computed by reference to the amount of time for which work had been performed. Rather than this (and as HMRC had indicated) they were payments to engage the actor for a specified period of time during which he could be called upon to provide his services. They were payments for being available to do work and were not payments computed in any way by reference to work being performed. They were, accordingly, not salary within the definition in the Categorisation Regulations, and ITV was not liable to pay secondary Class 1 NICs in respect of them. Mr Goldberg accepted that if secondary Class 1 NICs were not due, primary NIC’s need not have been paid on behalf of the actors.
62.	In support of these submissions, Mr Goldberg emphasised that the liability to pay Class 1 NICs arose only if, and then when, earnings were paid to an employed earner “in respect of any one employment of his which is employed earner’s employment”. He referred to ss 6(1) and 8(1) SSCBA 1992 and to regulation 2 of the Categorisation Regulations. Under s 6(1) SSCBA 1992, the question of whether an earner was in employed earner’s employment had to be determined “as and when earnings are paid . . . in respect of . . . employed earner’s employment”, so the question of whether the remuneration in respect of an entertainer's contract included payments by way of salary was not determined when the contract was entered into, but as and when payments were made under it. That conclusion fitted the wording both of section 6(1) and paragraph 5A.
63.	In this respect, Class 1 NICs were different from, say, Class 2 NICs; the latter had to be paid by every self-employed earner regardless of whether he did or did not have earnings. No liability to pay Class 1 NICs existed at all unless and until earnings were paid to or for the benefit of an earner who was an employed earner. The possibility that earnings might arise in the future and the fact that earnings had arisen in the past had no effect whatever on the liability to pay Class 1 NICs. Past payments did not create a future liability, and future payments (especially if they might not be made) which had not been made did not create a present liability or even a contingent liability. The only element which could create a liability to Class 1 NICs was a present payment to an earner in employed earner’s employment.
64.	 With reference to paragraph 5A of Column (B) Mr Goldberg argued that the word “payment” in the phrase “whose remuneration in respect of that employment does not include any payment by way of salary” must refer to an actual payment. It was not a reference to sums that might be payable but to sums which were paid. The language being used referred to an actual payment and not a possible payment. This was reinforced by the definition of salary. The words “made” and “paid” in sub-paragraphs (a) and (b) respectively could only refer to an actual payment. Similarly, the payments referred to in the opening lines of the definition of “salary” were actual, not potential, payments. He also based this argument on the contrast between the opening words of sub-paragraph (c) referring to payment and the concluding part of sub-paragraph (c), with its reference to “payable at a specific period”; he submitted that the definition in sub-paragraph (c) was making a distinction between what was actually paid and when it was payable. He argued that the only thing which could create a liability was a present payment to an earner in employed earner's employment.
65.	It followed that the question of whether an earner was in employed earner’s employment or was a self-employed earner must be answered as and when earnings were paid to the earner. Thus the issues raised by paragraph 5A of column (B) of Schedule 1 to the Categorisation Regulations had to be answered as and when earnings were paid and according to the payment which were actually made. As and when each actual payment of remuneration was made, it must be asked whether the payment included any element of “salary” as defined. If it did, the entertainer was, in respect of that payment, an employed earner, but if it did not, the entertainer was self-employed. Until any payment was made, every actor was self-employed because it was only when the payment was made that paragraph 5A was triggered; it did not and could not refer to potential, hypothetical or future payments.
66.	He submitted that paragraph 5(A) of Column (B) required the position of an entertainer to be looked at on a contract by contract basis, and that the entertainer’s status could change both payment by payment and contract by contract; an entertainer could be engaged under various contracts simultaneously.
67.	Mr Goldberg contended that this analysis by reference to actual payment of earnings accorded exactly with the wording of paragraph 5A; to make the Categorisation Regulations work, it was not necessary to distort the wording of the definition of salary in the paragraph (as HMRC’s interpretation did). It also explained why the paragraph referred to “payments” “made”, “paid” and “computed” in relation to work which “has been performed”, so that it referred only to actual, not potential payments. It referred to actual payments because it was actual payments of earnings, not potential payments, which created a liability to Class 1 NICs. The analysis did not in any way conflict with the purposes or intent of the NICs legislation.
68.	An actor could be engaged under a number of different contracts at once, specifying different bases for payment. Each of these would have to be analysed separately to establish the NIC consequences. As a mixed employment/self-employment result could be brought about by different contracts, there could be nothing wrong in principle with an analysis which had the same effect under one contract.
69.	Mr Goldberg suggested that there were four categories of factual situation needing to be considered; these were:
(1)	walk-ons;
(2)	a contract providing for a flat fee with no reference to time in the contract (in respect of which HMRC appeared to agree that there was no salary);
(3)	a contract providing for a flat fee for a period of being available regardless of the time spent performing;
(4)	the same, ie the flat fee, plus the possibility of variable fees.
70.	He referred to the detailed terms of the various forms of contract, and commented on the views expressed on behalf of HMRC on the interpretation of those contracts. There was a clear contrast between the position of the actors and that of the wall-ons. The terms on which the actors were engaged meant that the conditions in paragraph 5A were not fulfilled; they were not in receipt of “salary”.
71.	In summary, the issue before Tribunal was: what did paragraph 5A of Column (B) mean? Mr Goldberg emphasised, in the light of arguments put for HMRC, that the only question before the Tribunal was the liability of ITV in respect of secondary Class 1 NICs. The positions of, respectively, the individuals and Equity were not before the Tribunal.
Arguments for HMRC
72.	Mr Gammie reviewed the history of the legislation, and then the case law on the ordinary meaning of “salary”. (To the extent necessary, we comment on those cases later in this decision.) He submitted that, in its ordinary meaning, a “salary” was a form of remuneration that was agreed to be paid for a person’s services, that was stated as an amount that was to be paid for the person’s services by reference to some tract of time, and that would therefore ordinarily be paid periodically or at regular intervals over time. A salary was the sum of money that was agreed to be paid (or that attached to the particular appointment or position) for a person’s commitment to perform services over time. As such, it could be thought of as distinct from whatever payments were actually made in discharge of the obligation to pay the salary.
73.	However, not every payment made in return for performing services that literally satisfied the description of “a fixed payment made periodically as compensation for regular work” (the definition in the Oxford English Dictionary, as cited by MacKenna J in the GLC case at 287) was necessarily salary. It appeared from that case that two particular features of the arrangement might be important for remuneration for services to be characterised as a salary:
(1)	First, the arrangement must usually be one that was expected to have a substantial existence over time, during which work would be performed. In other words, it was an arrangement that was expected to involve regular or recurrent work over time and for that reason involved continuity of payment of or on account of a known sum at regular or specific intervals.
(2)	Secondly, the arrangement was one under which the individual concerned committed to render services at specific times or over a specific period while the arrangement subsisted (a “salaried arrangement”) rather than agreeing to do particular work (a “piece-work arrangement”). In other words, the essence of employment at a salary was that the salary bought the individual’s time during which he committed to provide his or her services, in contrast to a payment that bought particular services or work. The essential quality of salary was to purchase the individual’s time for some definite or indefinite period, short or long, rather than to pay for specific services.
74.	He submitted that in the context of a provision designed to bring entertainers within the scope of Class 1 NICs for employed earners in respect of any particular engagement, Parliament could not have intended the use of the word “salary” in the Categorisation Regulations to imply a need for the particular contractual arrangement to have a substantive existence over time in this sense. It was more important that the contract should envisage remuneration by reference to a tract of time during which the entertainer was contracted to provide his or her services.
75.	The essential quality of “a salary” in the context of a particular engagement entered into by an entertainer was that the employer was buying the right to the individual’s time for some definite or indefinite period, short or long. A salary in substance bought the entertainer’s time for some definite tract of time (even though the contract envisaged the rendering of a particular performance within that time) rather than just the time taken preparing for or in performance. The intrinsic character of what the entertainer was paid was unaffected by the fact that the amount paid was variable in some respect.
76.	He argued that the amendments made in 2003 made explicit the requirements that had previously had to be gleaned from the case law and the context of the 1998 amendment of the Categorisation Regulations.
77.	The purpose of the reference to “any payment by way of salary” was to ensure that any such element would result in the entertainer falling within the category of an employed earner. To fall outside that category, no element of the remuneration agreed to be paid should have the character of or represent salary, as statutorily defined. The expression did not refer to particular payments as and when made. It referred to the entertainer’s entitlement under the contract to be paid something in respect of his or her services that could be said to be by way of or in the character of salary, as statutorily defined. It was characteristic of a salary that it could be identified at the outset from the contractual terms before any payment by way of salary was made.
78.	The function of the Categorisation Regulations was to determine the status of the entertainer as either an employed earner or otherwise. The Categorisation Regulations did not function to determine whether particular payments, as and when made, were subject to Class 1 NICs because they satisfied the four conditions of the statutory definition. The status of the entertainer must be capable of determination at the outset, before any payments were made or any services were performed, so that both parties knew what their obligations in respect of NICs were.
79.	The definition of salary operated to define the species or genus of payments that counted as salary for the relevant purposes; it did not serve as a definition that had to be applied to each and every payment as and when made under the contract.
80.	Various aspects of the statutory definition supported the above conclusions. The reference to “payments” in the plural indicated that what was being defined was a particular species of payments due under the contract rather than a specific payment when made. This was a deliberate use of the plural, in contrast to “any payment by way of salary” in the opening part of paragraph 5A and “more than one payment” in paragraph 5A(c).
81.	The reason for the words in paragraph 5A(c), “where there is more than one payment”, was also that it was referring to a type of payment rather than to specific payments. It was extending the definition to allow for the possibility of a single payment. The use of the word “specific” was not related to the time specified in the contract for the making of the payment, but was intended to convey the meaning of “periodically” in respect of the words “payable at a specific period or interval”.
82.	Condition (c) was closely related to condition (d). It was because the type of remuneration in question must be “computed by reference to the amount of time for which work had been performed” that the requirement for periodic payment arose. Paragraph 5A(d) carried the particular connotations of time that it did because payments must be of a type that involved periodic payment where there was more than one payment.
83.	Paragraph 5A(c) and (d) in combination indicated that it was not enough that an entertainer was engaged to do particular work at an agreed hourly or daily rate, so that at the end of the engagement what the entertainer received could in literal terms be said to be computed by reference to the amount of time that the entertainer had spent in performance.
84.	Payment for particular work where the amount agreed to be paid depended on the time that the work actually took was neither “computed by reference to time”, nor did it give rise to a payment that was payable periodically where there was more than one such payment. Paragraph 5A(d) must be construed in the light of the other conditions and in particular the context in which it had to be applied, namely in defining a species or type of payment provided for under the contract for services at the time at which the contract was entered into. What had to be considered was not the actual payments as and when made and their relationship to the time actually worked, but at the payments that the contract provided should be made for entertainment services; in other words, payments which were computed by reference to the amount of time for which work had been performed because that was time for which the entertainer had contracted to work.
85.	The contrast which the draftsman was drawing in paragraph 5A(d) was between that category of payments that bought a particular service or performance, ie piece work or something similar, and that category of payments that bought the “employer” the entertainer’s time during which the latter agreed to provide his or her services. The statutory definition retained the distinction apparent in the ordinary meaning of a “salary” between “piece-work arrangements” and “salaried arrangements”. The type of arrangements that fell within the statutory definition were those that bought the individual’s time (within which he or she agreed to perform) rather than just the performance of particular work.
86.	In the context of identifying at the outset whether the contract for services entered into by an entertainer envisaged any payment of the type that ranked as salary, it was perfectly natural to refer to payments computed by reference to the time for which work had been performed irrespective of whatever time might eventually be taken in the performance of the acting services contracted to be provided. Work was performed when the individual fulfilled his contractual obligation by making himself available for work even though he was not called upon to do anything.
87.	What the draftsman had sought to do, and had succeeded in doing, was to enact a definition of “salary” as a genus or species of payments that reflected the ordinary meaning of “salary” as understood before 2003 in the particular statutory context in which the then undefined expression was used. In doing so, Parliament had made explicit what previously had to be discerned from the context, namely that it was unnecessary for the contract to have a substantive existence involving regular or recurrent work over time for the remuneration to constitute salary. Any contract for service, however brief or transitory, might involve salaried remuneration provided that the contract was buying the entertainer’s time (for which he would be paid periodically if there were more than one payment) rather than the performance of particular work.
88.	Mr Goldberg had commented in argument that highly paid actors did not need Class 1 benefits such as jobseeker’s allowance. The same could be said of any highly paid individual, but the National Insurance scheme and, in particular, the Categorisation Regulations did not distinguish between individuals according to the likelihood or not of their having to claim benefits, but by reference to their contractual employment position.
89.	It was meaningless to suggest that maybe the lowest-paid actors were employed earners, as Mr Cieslik had stated in oral evidence; this question was to be determined according to their remuneration package under their contractually agreed arrangements, as for the highest-paid actors.
90.	Mr Gammie did not call into question the testimony of Mr Cieslik and Mr Bain. If any single criticism was to be made of their witness statements, it was of the continual repetition of the assertion that actors were not paid for work performed.
91.	Mr Gammie referred to what he described as the first limb of Mr Goldberg’s argument, namely that liability to Class 1 NICs only arose in this context by reference to payment and that the categorisation of an actor therefore depended on whether any element of remuneration, when actually paid, satisfied the definition of “salary” in the Categorisation Regulations. Mr Gammie suggested that the reason for this argument was HMRC’s contention that it was necessary to categorise someone as employed or self-employed at the outset, before any payment had been made and before any work had been performed in the sense of the actor actually being in front of the camera. 
92.	 The essence of a salary was that it was fixed in advance and paid in arrears, which meant that the individual concerned could say, at the outset of the contract, that he was engaged for a salary, and know that the payments to be made would be made in the future after work had been carried out pursuant to the contract.
93.	 He submitted that Mr Goldberg’s contention that the categorisation was to be arrived at according to the payments that were made was wrong. HMRC’s view was that when an entertainer entered into a particular engagement, it had to be asked by reference to the contract for his engagement whether anything that was to be paid under it was going to be or have the characteristics of salary. Mr Gammie accepted that the Categorisation Regulations had to be applied on an engagement by engagement basis. It was clearly possible for a single individual to be categorised both as self-employed and as employed under two different engagements.
94.	Under the construction of the Categorisation Regulations adopted on ITV’s behalf, an individual who under an “all rights” contract for a single fee turned up at a particular time on a particular day to provide a performance for a particular amount of time might easily be within the scope of the Categorisation Regulations and regarded as being paid a salary, even though on HMRC’s interpretation the individual would be treated as self-employed.
95.	Mr Goldberg had contended that there was a distinction in respect of determination of status as between Class 1 and Class 2 NIC’s. The difficulty with this approach was that if the individual was only within Class 1 when a payment was made, that individual would need to know whether he or she was within Class 2 from the outset of the engagement as it might be necessary to register under Class 2 and to pay Class 2 contributions before any payment was actually made so as to enable the individual’s status to be determined. Apart from that, the Categorisation Regulations would have been completely unworkable in this context up to 2003 because there would have been no means of determining whether the remuneration under the contract was wholly or mainly salary if the categorisation was to be arrived at on a payments basis.
96.	On the question of the application of the legislation to the contracts, Mr Gammie argued that it was not sustainable to state that walk-ons engaged at a daily rate with set hours were working all day, even though they only walked on at fleeting intervals when filming took place, while actors were only working for those parts of the day when they were in front of the camera. Quite clearly, both actors and walk-ons were working all day. The reference to performance in the phrase in paragraph 5A(d) “. . . the amount of time for which work has been performed” was not by reference to an actor’s performance; it related to performance of the contractual obligation. Work in this context was the fulfilment of the contractual obligation entered into by the individual in respect of which payment was made; this was illustrated by the speech of Lord Oliver in Miles v Wakefield Metropolitan Council [1987] 1 AC 539 at 565, and particularly at 568 B to E. While an actor was fulfilling that contractual obligation, he was certainly working in the sense of performing his contractual obligation to work if called upon to do so.
97.	An element of the actors’ remuneration was salary, because under the agreements (other than the “all rights” agreement already mentioned) they were clearly paid by reference to days when they had to turn up and be on set to perform all their duties on such days, but also at other times when they were on standby and being paid for that, they were being paid for performing their duties under their contract. They were doing so in exactly the same way as any individual who turned up at his office on Monday and stared at the ceiling for the morning because his employer did not give him anything to do until it got to lunchtime; that individual was clearly performing the duties under his contract.
Discussion and conclusions
98.	In order to decide how the payments to actors under the various forms of contract are treated, we need first to arrive at the appropriate construction of the relevant statutory provision, paragraph 5A of Column (B) of Schedule 1 to the Categorisation Regulations, as substituted with effect from 5 April 2003. We have to decide whether that construction can be resolved purely on the words of the paragraph itself, or whether it needs to be informed by the circumstances surrounding its enactment in 2003, including the previous form of the provision, the reasons for the latter’s introduction, the announcements made both in 1998 and 2003 concerning the position of entertainers, and the previous case law on the meaning of “salary”.
 Timing of status determination
99.	However, before we begin considering that question, we need to deal with the second element of Mr Goldberg’s argument (which Mr Gammie referred to as the first limb of that argument). This was that the question whether an earner was in employed earner’s employment or was a self-employed earner must be answered as and when earnings were paid to the earner. On this basis, Mr Goldberg contended that the question of liability in respect of Class 1 NICs had to be answered as and when earnings were paid according to the payments which were actually made, and that this analysis was entirely consistent with the wording of paragraph 5A.
100.	 We are not persuaded by that argument. If it were correct, it would apply not only in the context of the payments to entertainers and the treatment of such payments under paragraph 5A, but to all categories of employed earners, including all those employed under actual contracts of service. All would be in a state of limbo in relation to their NIC status until they actually received payment.
101.	 Mr Gammie referred to the judgment of Lightman J in RCI Europe v Woods [2004] STC 315. RCI argued that the payments to a former director and employee which were made after his employment had ceased and in respect of restrictive covenants given after it had ceased did not give rise to liability to Class 1 NICs. Lightman J held at [40]:
“[40] Common-sense demands that in s 4(4) [SSCBA 1992] the reference to employed earner is read as a reference to the status in relation to which the payment is received. Section 4(4) lays down no specific temporal requirements. The reference to an ‘employed earner’ cannot be a reference to the individual’s status at the time the sum is paid. . . 
[41] I accordingly hold that ‘employed earner’ for the purposes of s 4(4) in s 2(1) and in s 7(1) must be references to the status of the recipient to which the payment is attributed, and the terms ‘employee’ and ‘employer’ for the same reason must mean the employee and employer under the relevant relationship and not the employer and employer at the time the payment is made.”
102.	 Mr Goldberg argued that the only point decided in RCI Europe v Woods was that the word “is” in the definition of “employed earner” in s 2(1) SSCBA 1992 (as applied to s 4(4) SSCBA 1992) included “was”. He submitted that the only relevance of the case was that Lightman J was emphasising the need to look at the payment. Until the payment was made, it was not possible to answer the question of liability to Class 1 NICs.
103.	 The difficulty which we have with Mr Goldberg’s comment on that case is that at the time of the payments in RCI Europe, the NIC status of Mr Haylock as an employed earner had already been determined; the point in issue was whether a later payment made by reference to that status gave rise to liability to NICs. The question in the present case is whether the NIC status of an actor is to be regarded as determined when the particular contract is entered into, or only by reference to the payments under that contract, as and when actually made.
104.	 Mr Gammie argued that it was necessary to categorise the particular individual as employed or self-employed at the outset, when that individual entered into the engagement, because it was necessary to know what the individual’s status was as a matter of NIC law and the scheme of liability in respect of NICs. We share the view that, as Mr Gammie accepted, it is possible for an individual to be categorised both as self-employed and as employed, under two different engagements (or even, as Mr Goldberg suggested, a variety of engagements). Mr Goldberg maintained that there was a difference in this respect between Class 1 NICs and Class 2 NICs. He argued that liability in respect of Class 1 NICs only arose when a payment was made, so that the question of the particular individual’s treatment for NIC purposes did not have to be considered until that point. In relation to Class 2 NICs, he indicated that the position was different; an individual did need to know whether he or she was self-employed and therefore liable to Class 2 NICs (and also Class 4 NICs).
105.	 If the position were as Mr Goldberg contended, any given individual actor would face severe practical difficulties in relation to his or her status for the purposes of liability to NICs. In respect of any given engagement, the individual would need to decide at the outset whether it was appropriate to register as self-employed and pay Class 2 NICs, or to assume that nothing should be done until any payment was eventually made under the terms of the contract. If the individual made the latter assumption, this would necessarily amount to a decision to categorise himself or herself as an employed earner within paragraph 5A, as that would be the only justification for delaying the process of accounting for NIC’s. (Any person choosing to delay that process and subsequently discovering that NICs should have been accounted for at an earlier stage might be at risk of an accusation that he or she was “knowingly concerned in the fraudulent evasion of any contributions which he or any other person is liable to pay” and therefore guilty of an offence under s 114 of the Social Security Administration Act 1992.) A situation in which the individual might either be within Class 2 or within Class 1 in respect of an engagement but did not know until payment was made (particularly where each individual payment under the contract had to be tested to see whether it fell within the former or the latter category) would result in an unacceptable degree of uncertainty with all too real practical consequences.
106.	 As Mr Gammie argued, if the determination of status was not to be made until actual payment, there would have been real practical difficulties with the Regulations in the form which they took between 1998 and 2003. Paragraph 5A of Column (B) (as then worded) required examination of the question whether the remuneration under the contract consisted wholly or mainly of salary. It would have been impossible to determine, as and when each payment was received under the contract, whether the overall total consisted wholly or mainly of salary, nor would it have been practicable to have allowed for retrospective adjustment if, for example, eventual payments for programme rights subsequently exceeded the total of payments previously treated as “salary” for these purposes.
107.	 Mr Goldberg’s argument would also produce the result that an earner’s categorisation would have to be decided on each and every occasion on which a payment of earnings was made. It would mean that under a single contract, a person might be regarded as deriving earnings from employed earner’s employment in respect of one payment, earnings from self-employment in respect of another payment, and reverting to deriving earnings from employed earner’s employment in respect of a subsequent payment.
108.	 Although we accept that RCI Europe v Woods was addressing the question of past status in relation to the determination of the treatment of the payment, we consider that it does give some indication that the earner’s status needs to be known as a matter of certainty before the time at which the payment is made, rather than leaving the payment itself to determine that status. In addition (as Mr Gammie pointed out) there could be many occasions when payments would be made under contracts to actors at a point long after the engagement had ended, so the question raised in that case is directly relevant to the contracts under review in this appeal.
109.	 We accept HMRC’s argument that it is necessary to categorise any given individual as employed or self-employed at the outset, when that individual enters into the engagement, because it is necessary to know that individual’s status in relation to that engagement as a matter of National Insurance law and the scheme of liability to NICs. (In the same way, it may be necessary to establish the individual’s entitlement to benefits, in certain circumstances even before any payment has been made under the contract.) As a result, the determination of the question whether the definition of “salary” is satisfied at the outset of the contract has to be made before any payment is made under the contract and before any services have been provided by the individual pursuant to it. It is clear from the overall structure of the Categorisation Regulations that categorisation is of the person, and not of the payment. In our view, Mr Goldberg’s argument based on actual payment tends to confuse liability to Class 1 contributions with categorisation for NIC purposes.
Meaning of “salary” as defined
110.	 The approach adopted in Part 1 of Schedule 1 to the Categorisation Regulations is to describe in the respective paragraphs of Column (A) the various forms of “employment” in respect of which earners are to be treated as falling within the category of employed earner, and then to provide in Column (B) a series of exceptions from the effects of the corresponding paragraphs in Column (A). Thus paragraph 5A of Column (A) is a form of subsidiary charging provision, specifying the circumstances in which an individual is to be treated as an employed earner and thus within the relevant main charging provision, SSCBA 1992 s 6. To escape from the charging provisions, it must be shown that an individual who falls within paragraph 5A of Column (A) is removed from its effects by fulfilling the condition set out in the first part of paragraph 5A of Column (B), that the remuneration in respect of that employment does not include any payment by way of salary, so that the assumed treatment as an employed earner is not to apply in respect of the relevant engagement.
111.	 Our starting point in relation to the interpretation of paragraph 5A of Column (B) of Schedule 1 to the Categorisation Regulations must be the actual words used in the current version of that paragraph; the text is set out at paragraph 9 above. Exception from being treated under paragraph 5A of Column (A) as falling within the category of employed earner is only permitted for a person “whose remuneration in respect of that employment does not include any payment by way of salary”.
112.	 We see the use of the word “remuneration” (a broad general word relating to the reward or rewards to be provided to the entertainer for providing the services pursuant to the contract) as the key to the test in paragraph 5A of Column (B). It implies the need to look at what the individual’s contract provides; does it, as all or part of the remuneration, provide for any payment by way of salary? In the light of our earlier conclusion that the earner’s status needs to be determined at the outset, we do not consider that what is under review is the payments once made; the test is prospective, based on the terms of the contract. The test is whether the individual’s entitlement to remuneration under the contract includes entitlement to any payment by way of salary.
113.	 That test is absolute, and entitlement to even a miniscule element of “salary” as defined will preclude the exception under paragraph 5A of Column (B) from being available, thus leaving the individual in question within the category of employed earner.
114.	 Mr Gammie argued that the words “any payment by way of salary” did not refer to particular payments as and when made; it was characteristic of a salary that it could be identified at the outset from the contractual terms before any payment by way of salary was made. Similarly, he submitted that the use of the words “salary means payments”, rather than using the singular, “payment”, implied that the definition was referring to a particular species of payment under the contract rather than to a specific payment when made. As these introductory words lead into the rest of the definition, and in the light of our earlier conclusions that the categorisation needs to be arrived at before any payment has been made under the contract and that the test of the nature of the remuneration relates to the individual’s entitlement under the contract, we accept this analysis of both elements of the statutory wording. On the basis of this interpretation, the introductory words of this definition may be restated in this way: “salary means payments of a type meeting the following conditions”.
115.	 The definition of “salary” in Paragraph 5A of Column (B) is made “for the purposes of this paragraph” and is therefore included specifically to determine the extent of the limitation of the exception provided by that paragraph. The introductory words of the definition are qualified by the four sub-paragraphs (a) to (d), which we refer to as “conditions”. It is clear from the use of the word “and” at the end of condition (c) that in order for any part of the remuneration to amount to “salary” and thus to prevent the individual from taking advantage of the exception from treatment as an employed earner, the payments must fulfil all four of the conditions listed.
116.	 Mr Goldberg indicated that conditions (a) and (b) of paragraph 5A did not appear to raise any controversial issue as between ITV and HMRC. However, Mr Gammie did raise a question as to these conditions. He contended that conditions (a) and (b) did not relate to the specific contract entered into by the entertainer; they were part of the general description of the type of contract to be treated as giving rise to “salary” within the definition. We accept this argument. The reference in condition (a) to “services rendered” is not to the services actually rendered under the entertainer’s contract, but to the reason for paying “salary” under this type of arrangement. We also accept his argument that the use of the reference to “a contract” [emphasis added] in condition (b) is descriptive of a type of arrangement, whereas any actual payment would be part of the remuneration in respect of the specific engagement and would therefore be paid under the contract for those entertainment services. 
117.	 By implication, condition (c) indicates that for these purposes an engagement for a single day for which a single payment is to be made can amount to engagement at a salary, despite the indication by MacKenna J in the GLC case at 288 that, for the purposes of the definition of “salary” at common law, recurrence of sessions of work would be required. Where there is to be more than one payment, the condition is that the payments are to be payable at a specific period or interval. We agree with Mr Gammie that this characterises this element of the remuneration as a type involving periodic payment or payment at regular intervals. We interpret the words in condition (c) “. . . payable at a specific period” as referring to payment on a series of dates, not necessarily with equal intervals between them. There may be questions as to the application of condition (c) to particular contracts; we consider this below.
118.	 Mr Gammie argued that conditions (c) and (d) were closely related, as it was because the type of remuneration in question had to meet condition (d) that the requirement for periodic payment arose, and that condition (d) carried its particular connotations of time because of the requirement for periodic payment or payment at regular intervals. We accept that these conditions are linked as he suggested.
119.	 The major element of the dispute between the parties is the meaning of condition (d), in particular in the context of the terms of the contracts between ITV and the actors.
120.	 Condition (d) provides that, in order to be treated as “salary”, the payments made to the individual employed as an “entertainer” must be computed by reference to the amount of time for which work has been performed. The first element is that the computation of payments (which, under condition (c), must be payable at a specific period or interval) is based on time. Thus a contract providing for a fee payment or series of fee payments to an actor arrived at without any consideration of the time to be taken to carry out the work to be provided by the actor pursuant to the contract would not fulfil the terms of this condition, and as the conditions are cumulative, such a fee or fees could not be regarded as “salary” for the purposes of paragraph 5A.
121.	 The second element of condition (d) is the reference to “work”. We consider below the meaning of this word in the context of the services contracted to be provided by the actors.
122.	 The third element is the words “has been performed”. For the reasons which we have already given, we do not consider that these are referring to the actual performance of work under the terms of the contract for services entered into by the actor; this is part of the description of a type of payment potentially to be made, rather than looking back at a later stage to the work which has ultimately been performed pursuant to that contract.
123.	 Although condition (d) uses the word “performed”, the reasons mentioned in the previous paragraph satisfy us that it is not referring as such to the performances given by the entertainer, but to the carrying out of the contracted work pursuant to the contract for services. The words “has been performed” refer to “work”, so that condition (d) is looking at “work” which “has been performed”. As condition (a) refers to payments being made for services rendered, we interpret condition (d) in the light of (a), so that in our view where (d) mentions “work”, it is referring to the rendering of services under the contract. In the context of actors, we do not think that “work” is limited to giving a performance in front of the camera; what the actor agrees to provide is his or her services under the contract in question, which includes being available on the contracted dates, whether or not any work in front of the camera is required on any particular day in question. Thus any provision for payment computed by reference to the time for which services under the contract are to be rendered will meet the terms of the condition. Mr Goldberg submitted in the course of argument, referring to a provision for “post-synchronisation payments”, that such payments were not salary as defined because they were not computed by reference to the time for which work had been performed but only for the time spent being available. In the same way, he argued more generally that the time-related fees were paid for the service of being available. We regard the latter as another way of applying the test in (d), rather than being a contrast to what is being referred to in that condition.
124.	 As a result, any contract under which any part of the fee is calculated by looking at the time which is to be taken for the entertainer to provide the contracted services (including the service of being available to provide services as required) will fulfil the condition. Mr Gammie argued that it was not sufficient to fulfil condition (d) that an entertainer was engaged to do particular work at an agreed hourly or daily rate so that, looking at the position at the end of the engagement, the amount received could be said to be computed by reference to the amount of time which he or she had spent in performance. Mr Goldberg indicated that he found himself unable to follow this reasoning and considered it to be wrong. However, we accept Mr Gammie’s argument; the key point is that, as we have already decided, the position has to be examined at the outset, and is not to be measured at the point when the process of providing services under the contract has been completed. We agree that the contrast is between buying the individual’s time during which the latter agrees to provide his or her services, which falls within condition (d) and therefore payment constitutes “salary”, and payment for particular work, where the payment is buying a particular service or performance. The latter falls outside condition (d).
125.	 Conditions (a) to (d) inclusive are the elements required for “payments” to fall within the definition of “salary”. As we have already concluded, this part of paragraph 5A is not looking at actual payments made, but at the type of payments which would come within that definition. These conditions are part of a generalised definition, against which the terms of the entertainer’s engagement must be measured. The question to be answered is: does the contract in question entitle the entertainer to any payment by way of salary, ie payments of that description?
Policy issues as an aid to interpretation of paragraph 5A
126.	 Although we have arrived at our conclusions on the interpretation of paragraph 5A without needing to consider the underlying policy, we think it appropriate to test those conclusions against that policy, to the extent that it can be discerned from the available published materials. Mr Goldberg referred to the background to the original legislation, and to the reasons for the changes made to it in 2003. He stressed the need to make provision for struggling actors and for walk-ons, and contended that the legislation needed to distinguish between these categories and successful actors. Payment for availability had not worked to exclude successful actors, so condition (d) had been introduced.
127.	 In the light of his arguments, we have examined the Ministerial Statement made in 1998. This was not couched in terms of categories of actor. The intention expressed was that the “majority of performers” should be treated as “employees for National Insurance purposes”, ie as employed earners whose earnings would be liable to Class 1 NICs. Paragraph 3 of the Introduction to the “Guidelines”, in the revised edition dated April 2005, referred to the position before 1998:
“Prior to 1998, the main category of performers in the entertainment industry not paying Class 1 contributions were certain ‘Key Talent’ stars who were generally regarded as having been engaged on productions because of their celebrity status.”
128.	 The Guidelines then explained the changes made in 1998, and pointed out that those in receipt of payments for rights and additional use payments in excess of the salary element were not liable to Class 1 NICs. HMRC referred to what had subsequently become the usual practice for the majority of entertainers in the film industry and some in the TV industry, namely to receive as part of their remuneration package pre-purchase payments as compensation for the loss of future repeat fees and rights and royalties worth many times the salary element. As a result few actors were paid “wholly or mainly” by salary and it was realised that the Categorisation Regulations did not achieve the objective of bringing most entertainers into Class 1. This had led to the change made in 2003.
129.	 The Ministerial Statement and HMRC’s comments in the Guidelines contain no indication that the application of Class 1 should be confined to limited classes of actor. As far as it is possible to derive from such statements any indication of legislative intention, the impression given is that the majority of actors would be expected to fall within Class 1, rather than this treatment being confined to a limited sector of the acting profession. The one exception referred to by HMRC in the Guidelines was for “Key talent” stars; we think it reasonable to assume that these would represent a very small proportion of the acting profession.
130.	 Our conclusion is that the changes made in 1998 and 2003 respectively were intended to result in the majority of actors falling within Class 1, whatever their status within the “pecking order” of the profession, and however substantial or meagre their earnings from it. Although the Guidelines at paragraphs 1 and 2 of the Introduction refer to the reason for the 1998 changes as being to provide for availability of universal title to contributory benefits, we agree with Mr Gammie’s argument that the National Insurance scheme and the Categorisation Regulations do not distinguish between individuals according to the likelihood or not of their having to claim benefits, but by reference to their contractual employment position. The terms of the actor’s engagement must be tested against paragraph 5A of Column (B) to establish whether or not the actor is excluded from categorisation as an employed earner.
131.	 Mr Goldberg referred in argument to the position of walk-ons before 2003. In the absence of any published information dealing specifically with their position, we do not feel able to comment on the treatment for NIC purposes of walk-ons before the 2003 changes.
General law on the meaning of “salary”
132.	 We do not feel that there is any real need to go into detail on the general law; our conclusions are based on the interpretation of the statutory provision, and in any event we consider that they are consistent with Mr Gammie’s detailed review of the earlier cases.
Application of the definition to the contracts
133.	 Mr Goldberg referred to four categories of situation to be considered, whereas ITV and Mr Bain referred to six. Although there may be similarities between them, we analyse all six of the categories included in the evidence, by reference to the sample agreements provided.
134.	 In his evidence, Mr Bain explained that in the course of fee negotiations with the actor’s agent, the period of engagement was known. He explained that the period of engagement was the length of time for which the actor had to be available to be called upon on a first call basis, rather than the actual amount of time for which he or she would be required actually to perform on set or in front of the camera. In short, this was the duration of time in which that actor might be restricted, wholly or partially, from taking part in other activities. He then suggested that the period of engagement might include periods when work was not performed if the actor was not required to perform on set and give that the actor could not accept any other contracts of engagement during that period. We have concluded that the words “work has been performed” in paragraph 5A(d) of Column (B) is to the provision of the contracted services pursuant to the contract, rather than simply to the performance given by the actor, and therefore we do not accept the latter suggestion. We do accept his evidence as to the nature of the period of engagement and the part which it plays in the negotiations with the actor’s agent.
The Bespoke Agreements
135.	 Mr Bain indicated that the Bespoke Agreements were used to engage those actors who were considered to be top talent, known in the industry as “marquee talent”. Actors engaged under Bespoke Agreements were engaged for a specific production or programme or episode. They were engaged for a period of engagement, and paid “guaranteed remuneration”. The period of engagement referred to the time during which the actor had to be available to film the production or programme, and was the time during which the actor was on first call to ITV and was not free to take on any other work. This period was determined principally by reference to the number and duration of episodes to be broadcast, on the basis of which the production schedule was determined.
136.	 The sample 2008 Bespoke Agreement referred to in Mr Bain’s evidence defines the “Start Date” as “in respect of the programme read-through and rehearsal week commencing 26 July 2006 [which we assume should have been 2008]; dates may slip by up to 7 days”. The Period of Engagement was eight shooting weeks to be confirmed between 25 August 2008 and 17 November 2008; again, dates could slip by seven days.
137.	 Under the heading “Term of Engagement”, the agreement provided:
“The Company shall be entitled to the Artist’s exclusive services in respect of the Programmes (including with respect to promotion and publicity services as elsewhere herein provided) during the Period of Engagement, and thereafter subject only to the Artist’s prior professional commitments: . . .”
Other sub-clauses following this related to provision of services on a second call basis in respect of such matters as publicity, conference, wig dress and clothes fittings. The clause also contained the following sub-clause, referring back to the above:
“on an exclusive basis for 6 ‘free’ further production days, in addition to the eight shooting weeks within the Period of Engagement and/or following immediately consecutive to the Period of Engagement, for any added and substituted scenes, retakes as the Company may require to complete principal photography of the Role if necessary”.

138.	 A specific clause relating to NICs was included:
“The Artist’s services are rendered in his capacity as a self-employed person and nothing in this Agreement shall suggest a relationship inconsistent with this status and no Class 1 national insurance contributions shall be deducted by the Company from the Artist’s fees.”
139.	 Despite the latter clause, it is clear that the parties cannot contract out of liability to Class 1 NICs if the nature of the contract between them is such that the exception set out in paragraph 5A of Column (B) does not apply because the remuneration of the actor in question includes a payment by way of salary. In his evidence, Mr Bain stated that it had up to now been his understanding that it was HMRC’s view that secondary Class 1 NICs were not payable in respect of fees paid under Bespoke Agreements. In argument, Mr Goldberg mentioned that he did not want to make an administrative law point in this context. We have not examined any evidence as to the course of dealings between HMRC and ITV in respect of this element of the dispute, so can only set out our conclusions as to the application of the principles as determined above to the various forms of contract; if, based on the view which we express below concerning Bespoke Agreements as represented by this sample agreement, there are any grounds for an administrative law question to be raised, this will have to be pursued as a separate matter.
140.	 We consider that under this agreement, ITV is buying the actor’s time during which the latter agrees to provide his or her services. As a result, the agreement fulfils condition (d). Conditions (a) and (b) are also fulfilled, on the basis explained above. The remaining question is whether condition (c) is fulfilled.
141.	 Under “Payments”, the sample agreement contained a payment schedule. Payment was to be made by telegraphic transfer to an entity which we assume to be the actor’s agent. The dates specified were:
4 August 2008
10 September 2008
1 October 2008
31 October 2008
24 November 2008
Other than the first payment, the amount of each payment was equal; the first payment was of half that amount.
142.	 The amounts are not paid at a specific interval, but on a series of specified dates. Our conclusion on the interpretation of condition (c) is that it is fulfilled where payment is to be made on a series of dates, not necessarily with equal intervals between them. We therefore consider that this condition is also fulfilled.
143.	 Accordingly, despite any previous understanding on the part of ITV, and despite the “NIC clause” in the sample Bespoke Agreement, we find that all four conditions in the definition of “salary” in paragraph 5A of Column (B) are fulfilled, so that an actor engaged under a Bespoke Agreement of this nature falls to be treated as an employed earner for NIC purposes and ITV is responsible for accounting for primary and secondary Class 1 NIC’s in respect of such an actor’s earnings under the Bespoke Agreement.
All Rights Agreements
144.	 Mr Bain explained that an actor engaged under the All Rights Agreement was engaged to perform a specific role in a specific programme, engaged for a specific period of engagement, and received a single “Total Inclusive Fee”. The process of negotiating the amount of the all-inclusive fee was similar to that for the Bespoke Agreement, being carried out “up front” between ITV and the actor’s agent within the parameters of the production budget, taking into account various determining factors.
145.	 The single all-inclusive fee received by the actor engaged under an All Rights Agreement was for all the services provided by the actor, which included his services performing for the primary transmission of the production and for any future transmissions. This ensured that ITV would have no further liability to pay the actor any additional amounts, such as in the form of royalties, if there were any repeat transmissions of the programme in the future.
146.	 The sample “All Rights Contract” referred to in Mr Bain’s evidence provided that the actor agreed to take part in the specified programme, performing the specified role, for the fee set out in the schedule and on the date, time and place set out in the schedule. Other than in one sub-clause, set out below, there was no reference to a period of engagement, nor any reference to exclusivity. The actor undertook various obligations, including the following:
“(a) To be ready in every way to go on at least thirty minutes before transmission or rehearsals begin at places fixed by the Company”;
“(e) The Artist agrees that (subject to the reasonable requirements of the Artist’s prior professional engagements) the Artist shall attend and render services as, when and where reasonably required by the Company in order to attend press interviews and meet other reasonable publicity requirements during the Period of Engagement and thereafter during the period of exploitation of the production.  . . .
(f) To perform your services hereunder to the best of your skill and ability.”
147.	 The reference to the “Period of Engagement” in sub-clause (e) appears to have been inserted on the assumption that various other standard clauses were included in the agreement; we do not attempt to consider what the effect of that sub-clause was. We do not think that it affects the general nature of the agreement, which simply required the actor to provide the contracted services in return for the fee. The actor did not enter into any obligation not to render services in any other production. Although this was not explicitly stated, if the actor did not appear, the contract would not have been fulfilled and the actor would not have been able to claim any part of the fee. The one possible exception to this was the following clause:
“If you are unable to appear because of illness the Company is not liable to pay any fees except for work actually done.”
148.	 On behalf of HMRC, Mr Gammie accepted that the remuneration under the All Rights Agreement in this form did not include any payment by way of salary; the specimen contract did not incorporate any terms of the standard Equity or PACT agreements and appeared to envisage a single fee by reference to the artist’s performance on a single occasion, at a time and pace to be agreed and not on a daily basis comparable to a walk-on. The fee, if shown in a particular case to have been negotiated at an hourly rate, might literally be thought to satisfy the statutory definition of “salary”, but on HMRC’s construction of the exclusion from the Categorisation Regulations, no part of the fee payable under this contract could be said to be a payment by way of salary.
149.	 Mr Goldberg argued that if it were possible to negotiate the fee by the hour for work that had been performed (which would give rise to difficulties for fee negotiations carried out in advance), he could not see why the fee would not be within the definition of “salary”.
150.	 We accept the position as set out by Mr Gammie. Contrary to Mr Goldberg’s submissions, and as we have determined, the process does not involve testing the position at the point when payment is made, but at the point when the contract is entered into, and by reference to the generalised concept of “salary” as defined. We find that the All Rights Agreement is not a contract under which any part of the fee is calculated by looking at the time which is to be taken for the actor to provide the contracted services, and that the fee is not buying the actor’s exclusive time for a period during which the contracted services are to be provided. The actor is being paid for providing the service of taking part in the particular programme for the specified fee. As we have indicated in setting out our conclusions on the legislation, this is payment for particular work, where the payment is buying a particular service or performance; it falls outside condition (d). We find that payment under the All Rights Agreement is not “salary”, so that in respect of the earnings under such a contract the actor does not fall to be treated as an employed earner within Class 1.
The ITV/Equity Form of Engagement
151.	 Mr Bain referred to the various forms of the ITV/Equity forms of Engagement as the “Equity Agreement”. This was used for long running series including soap operas. Usually under the Equity Agreement a period of engagement was specified, as well as a “Total Guaranteed Programme Fee”, followed by a narrative describing the applicable fees. Specific episodes or a minimum number of episodes might be agreed, and a maximum number of episodes might or might not be included. In some instances a weekly fee was specified. During the period covered by the appeal, the Equity Agreement assumed four different forms. In each case the standard template in Schedule A of the ITV/Equity MRA was adjusted by ITV to accommodate the applicable terms. We consider separately the relevant terms of each of these agreements.
152.	 The first form is the All Inclusive Fees Equity Agreement. Mr Bain explained that this was usually used to engage known, established actors who played regular characters in soap operas. He referred to five examples; the first two were used for actors who had appeared in the same soap opera since 1995 or earlier. The other three were used for actors engaged subsequent to 1995 and during the period under review.
153.	 Under the first example, the actor was engaged to appear in a soap opera for a “minimum guarantee” of 40 episodes. The Period of Engagement was from 1 December 2008 to 29 November 2009. The agreement specified various elements of the fee, and provided that subject to the “Artist” fulfilling his or her obligations under the contract, the Artist’s guaranteed earnings under it would be a specified amount. This was not to be paid in equal instalments but on a weekly basis for the episodes completed to that date. There were two clauses numbered 8.2; the first of these provided:
“Save as otherwise specified hereunder, the Artist agrees that throughout the Period of Engagement the Company shall have first call on the Artist’s services and the Artist will not undertake any commitment for supplying or rendering the Artist’s services to any third part for any purpose without the Company’s written consent.”
154.	 Similarly, under paragraph 10.1 of the Schedule, the Artist warranted:
“that the Artist will render services willingly and to the best of the Artist’s creative ability and such services shall be rendered on a first call basis during the Period of Engagement.”
155.	 Taking into account the requirement for the actor’s services to be provided on a “first call”, ie exclusive, basis for the Period of Engagement, we find that that under this agreement, ITV is buying the actor’s time during which the latter agrees to provide his or her services; the fee is calculated by reference to the time which is to be taken for the actor to provide the services pursuant to the contract. As a result, the agreement fulfils condition (d). We also find that conditions (a) to (c) inclusive are fulfilled.
156.	 Under the second example, the minimum guarantee was of 80 episodes. The basis for the calculation of the fee was similar, but the amounts per episode were lower. The Period of Engagement was the same, as were the first clause 8.2 and paragraph 10.1 of what in this agreement was Schedule 1. Our findings are the same for this agreement as for the first example of the All Inclusive Fees Equity Agreement.
157.	 The third example, for the same soap opera, provided for the Period of Engagement to be from 13 June 2009 to 11 December 2009. The contract guaranteed a minimum of 36 episodes. Again, clause 8.2 was as above, as was paragraph 10.1 of Schedule 1.
158.	 The fourth example was for a different soap opera. The Period of Engagement was from 20 July 2009 to 18 July 2010. The number of guaranteed episodes was 95. Clause 8 provided certain options, which suggests to us that this agreement may fall within the next sub-category. The company engaging the actor reserved the right to designate specific days as days when leave must be taken (subject to a minimum notice period); the actor was precluded from undertaking work for any third party during periods of leave. Clause 9.2 of this agreement was in the same form as clause 8.2 of the other agreements. The warranty in paragraph 10.1 of Schedule 1 was in exactly the same form as in the agreements already considered.
159.	 The fifth example was an agreement relating to the same soap opera as the first three examples. The Period of Engagement was from 15 August 2009 to 13 August 2010. The number of guaranteed episodes was 80. Clause 8.2 is the same as the corresponding provision in the other four agreements, as is paragraph 10.1 of Schedule 1.
160.	 Our findings for these three examples are the same as for the first two; these agreements all fulfil conditions (a) to (d) inclusive, so that they provide the actors with “salary”. Accordingly, the exclusion in paragraph 5A of Column (b) does not apply and the actors fall to be treated as employed earners in respect of their earnings under any of these five forms of agreement. As a consequence, ITV is liable to account for secondary NICs in respect of those earnings.
161.	 The second form of the Equity Agreement is the “Option Equity Agreement”. Mr Bain explained that this was also used in some cases to engage actors to perform as regular characters in soap operas. This form contained an all inclusive fee, similar to the first form. The one difference was that this form provided for the actor to grant an option to ITV which, if exercised before a specific date, allowed ITV to engage the actor for a further engagement period and for a further minimum number of episodes. If ITV exercised the option, the “Programme Fee” that would become payable to the actor per episode was a predetermined all-inclusive fee, which was stated in the agreement.
162.	 Under the example of this type of agreement, the actor was engaged to appear in the first of the soap operas referred to above. The Period of Engagement was from 13 July 2008 to 10 July 2009. The minimum guaranteed number of episodes was 80. Clause 8(b) was in the same form as clause 8.2 of the other agreements already considered. The option was to engage the actor for the further period from 11 July 2009 to 9 July 2010 for a minimum guarantee of 80 episodes, for a specified programme fee.
163.	 Clause 9 of the “Special Stipulations” incorporated in the agreement provided:
“. . . the Artist agrees and undertakes during the currency of this Contract that he/she shall not without the Company’s prior consent:-
(a) take part or appear in any television or theatrically released film or programme or other recording for exploitation in any media in the United Kingdom for any other person, firm or company including without limitation the British Broadcasting Corporation; or
(b) give any performance on or to be used on sound radio or theatre in the United Kingdom.”
164.	 Clause 11 provided:
“The Artist is on first call to the Company at all times during the currency of this Contract (subject to Clause 17 hereof) and will not enter into any commitments or arrangements which may interfere with or otherwise adversely affect the full performance by the Artist of his/her obligations hereunder.  . . .”
165.	 Clause 17 provided:
“The Company will give good faith consideration to the Artist’s wish to participate in projects offered by third parties. However, the Company reserves the right to decline its consent for Artist’s absence for such activities if in the reasonable opinion of the Company it represents a conflict of interest for the Company or may have a detrimental effect on the on-screen integrity of the Artist’s character and/or the planning, storylining or scheduling of the Artist’s character and/or storyline in the Programme.”
166.	 Despite the slightly different provisions in this agreement, we find that it fulfils condition (d), as well as conditions (a) to (c), on the same basis as for the other Equity Agreements.
167.	 The third form of Equity Agreement is the “Weekly Fee Equity Agreement”. Under this form, for a different series of programmes, the Period of Engagement was from 9 July 2007 to 16 November 2007. This was for a maximum of 50 programmes. As implied by the title, a specific weekly fee was payable. The agreement contained options for the Company to engage the Artist’s services for further periods of either 26 or 52 weeks. Clause 8(b) of the agreement was in the same form as clause 8.2 or 8(b) of the other agreements already considered.
168.	 As before, we find that this agreement fulfils conditions (a) to (d) inclusive.
169.	 Mr Bain explained that the next form of Equity Agreement, the “Short Term Equity Agreement, was usually used for the engagement of guest actors in a production for a short term period. In the first of the two examples given, the “Period of Engagement” was from 29 March 2009 to 8 April 2009; the “Read through” was 30 March 2009. This was for a single episode, to be filmed over 11 days. The wording of Clause 7.2 and paragraph 9.1 of the Special Stipulations was the same as that in, respectively, Clause 8.2 and paragraph 10.1 of the Schedule to the All Inclusive Fees Equity Agreement.
170.	 The other example of this form engaged the actor for 11 specific episodes of a soap opera to be filmed over a three week period; the Period of Engagement was from 10 November 2006 to 12 December 2006. Paragraph 2 of the Special Stipulations provided:
“The Artist’s services in this regard shall be rendered on a first call basis during the period of engagement and a second call basis if required beyond the period of engagement.”
171.	 We find that both examples of this form of agreement fulfil conditions (a) to (d) inclusive.
172.	 The fifth form of Equity Agreement is the “Equity Stunt Agreement”. This relates to stunt performers. HMRC accepted in the course of the hearing that stunt coordinators did not fall within Class 1; we refer to this below. Mr Bain explained that usually such contracts provided for the performer to perform as a stunt performer in a specific programme or episode, to be available for a specific period of engagement of one to two or more days, on either a continuous or discontinuous basis, and to be paid a guaranteed fee.
173.	 In the example given, the Period of Engagement was from 15 December 2008 to 16 December 2008; the performer was engaged as a “stunt double”. Clause 8.2 was in the same form as above, as was the paragraph of the Special Stipulations numbered 8.1, corresponding to the provision quoted above.
174.	 We find that this form of agreement fulfils conditions (a) to (d) inclusive.
 The “PACT Agreement”
175.	 Mr Bain indicated that this provided for the actor to be engaged for a specific production or for one or more episodes of that production, engaged for a specific period of engagement, and to receive various predetermined fees. During the period in question, ITV used two forms of this contract, the “All Inclusive Fee PACT Agreement”, and the “Guaranteed Engagement Days PACT Agreement”. Under the former, an all-inclusive fee was payable to the actor, committing the actor to be available on unspecified days during a specified period of engagement. Under the second, the engagement days were specifically identified; the only difference from the other form was that the guaranteed all-inclusive fee was described as comprising both “Engagement Fees” and “Production Day Payments”. In addition, ITV used a separate form of the PACT Agreement to engage stunt performers and stunt co-ordinators.
176.	 The example of the All Inclusive Fee PACT Agreement, relating to a drama production, provides at Section E:
“The Producer shall have first call on the Artist’s services for a period beginning on the first day on which the Artist shall, following a call from the Producer, attend to render services in the filming/recording of the Artist’s part for the following nominated and/or unspecified period(s) in accordance with the provisions of Clause . . .
Dates of Engagement
From: 10.01.07		To: 31.01.07”
177.	 The example of the Guaranteed Engagement Days PACT Agreement, relating to another drama production, contained the same wording in Section E, except that the “Dates of Engagement” were given as “From 20.08.2008; To 21.08.2008	”, with the “Number of Days” shown as “2”, and “From 01.09.2008; To 02.09.2008”, also with the “Number of Days” shown as “2”. The total was shown as “4 days”. Section G provided:
“The Producer shall pay the Artist £[x] for the period(s) specified in Section E above calculated by adding Section F(iv) and F(v) whether or not the Artist is called to render services.  . . .”
178.	 The example of the PACT Stunt Agreement provided in Mr Bain’s evidence was an agreement relating to a stunt co-ordinator. Mr Goldberg informed us on the first day of the hearing that Mr Gammie on behalf of HMRC had agreed that a stunt co-ordinator was not an entertainer for the purposes of this legislation. It is not clear to us whether (and if so, to what extent) the form of agreement would differ if it related to a stunt performer rather than a co-ordinator. On the assumption that the agreement would contain broadly similar terms, we make findings in relation to this agreement, subject to any specific representations which the parties may wish to make within 28 days of the release of this decision.
179.	 Section D provided that the Producer was to have first call on the Stunt Co-ordinator’s services on a series of individual days, and for one period of two days. In the Special Stipulations, the Co-ordinator warranted that he or she would render services willingly and to the best of his/her creative ability, and that such services would be rendered on a first call basis during the Period of Engagement. Section F provided:
“The Producer shall pay to the Coordinator the fees set out in Section E whether or not the Coordinator is called to render services which shall grant to the Producer all rights as specified in Appendix TI 7a of the Agreement.  . . .”
180.	 Mr Bain described this form of contract as providing for an all-in fee to be payable per day during which the stunt performer was required to be available.
181.	 Subject to any information being provided to us to suggest that the agreement relating to stunt performers might be regarded as different in the relevant respects from that relating to stunt co-ordinators, we find that all these forms of the PACT Agreement fulfil conditions (a) to (d) inclusive.
Memo fees
182.	 Mr Bain explained that a “Memo fee” was not a contract. It was an internal payment instruction. These were payments made in respect of disbursements for certain attendances and expenses incurred from time to time. The example which he provided was a “recce fee” payable to a stunt coordinator. Memo fees were paid to actors after the event in respect of additional sessions required of them that were ancillary to their acting and performance services, such as attending a costume or wig fitting or carrying out a site “recce” (ie reconnaissance). The fees were computed by reference to sessions for which the actor was available on set for such attendances. Memo fees were also used to reimburse actors for certain costs and other agreed expenses at an agreed rate, such as “per diems”, payment for petrol costs or food expenses.
183.	 As the nature of memo fees can vary so widely, we are not in a position to make general findings in respect of them. If such a fee or payments could be regarded as amounting to a payment computed by reference to the time for which services under some form of contract between ITV and the actor are to be rendered by the latter, it would appear to amount to “salary” within the definition in paragraph 5A of Column (B), but if it represents pure reimbursement of expense, such a fee or payment would appear to fall outside that definition. We assume that the parties will be in a position to agree the NIC treatment of the various forms of memo fee, but if they are unable to do so, more detailed evidence would be required for us to be able to determine the question.
 Walk-ons
184.	 In their evidence, both Mr Cieslik and Mr Bain made a very clear distinction between walk-ons and actors. In Mr Cieslik’s experience, walk-ons were always on standby; they were not like actors, who were “treated with comparative kid gloves”. Walk-ons were not treated, pampered or directed in the same way; actors and walk-ons were different species. Mr Bain contrasted walk-ons with actors; walk-ons performed services which did not require high level skill, creative or artistic ability. They were engaged for the day when they arrived on set, or shortly before that; their engagement was on a daily basis. A fixed national rate of fees applied in respect of their services. The fees were computed by reference to time worked by the walk-on, on a daily basis; walk-ons were engaged for the day, required to attend the set for work on that day, and paid in respect of their work for that day. Mr Bain confirmed in his witness statement that ITV accepted liability for secondary Class 1 NICs in respect of walk-ons, although it was not clear from his evidence whether ITV had accounted for such secondary contributions. As this decision is made “in principle”, we leave it to the parties to resolve this aspect of ITV’s liability to secondary Class 1 NICs.
185.	 We have set out above our general conclusion on condition (d), namely that any contract under which any part of the fee is calculated by looking at the time which is to be taken for the entertainer to provide the contracted services (including providing the availability to perform services) will fulfil that condition. We are satisfied that the terms on which walk-ons are engaged fall within this description, not for the reasons advanced by ITV based on its construction of the words “has been performed”, but because the walk-ons agree to be available to provide their services at any point during the period for which they are engaged. We are also satisfied that the terms fulfil conditions (a) to (c).
Evidence on computation and negotiation of fees
186.	 A substantial part of the evidence related to the process of arriving at the budget for each programme, the factors taken into account in negotiating with the actors to determine the amount of their fees, and the extent of the actor’s entitlement to rights in respect of the programme in question (for such matters as future broadcasts). In the light of our construction of paragraph 5A of Column (B), we do not think that this evidence assists in determining the question raised by that provision.
Summary of conclusions
187.	 We find that in respect of all the contracts other than the All Rights Agreement, including the contracts for walk-ons, the entertainers’ remuneration includes “any payment by way of salary”, as specified in paragraph 5A of Column (B) of Part 1, Schedule 1 to the Categorisation Regulations. As with the walk-ons, the actors agree to be available to provide their services pursuant to their contracts during the period of engagement, generally on a “first call” (ie exclusive) basis. As such, their contracts entitle them to remuneration which does include “salary”. Under paragraph 10 of Column (A) of Schedule 3 to the Categorisation Regulations and paragraph 10 of Column (B) of that Schedule, liability to secondary NICs in respect of such remuneration falls on ITV.
188.	 As requested by the parties, this decision is given in principle. In the event that the parties wish us to make further determinations, application should be made to the Tribunal.
Costs 
189.	 Neither party applied for costs. This is a “Complex case” as referred to in Rule 10(1)(c) of the Tribunal Rules (SI/2009/273 (L.1)). We make no order, and leave it to the parties to make such application in accordance with Rule 10 as they think fit.
190.	 This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN CLARK

TRIBUNAL JUDGE
RELEASE DATE: 23 November 2010