Pay tax on payments to foreign performers
How to deduct Withholding Tax from payments to performers from outside the UK.
If you pay someone who does not live in the UK for making an appearance or performing in the UK and the total payment is more than the personal tax allowance, you must deduct tax from the payment. You must still deduct tax if the payment is made through a third party.
This is called Withholding Tax. It is a payment on account against the performer’s final UK tax bill.
If you think payments to a performer will qualify for Withholding Tax, Contact the Foreign Entertainers Unit and register for Withholding Tax. Once you are registered you will be sent form FEU 1 at the end of each accounting period.
If there is any doubt where the performer lives, Withholding Tax must be deducted.
If you pay a group or company with both non-resident and UK resident performers, deduct Withholding Tax from overall payment to the group.
If you don’t deduct Withholding Tax or make the payment when it is due, you may have to pay the tax and any interest charged from your own funds.
Appearances that qualify for Withholding Tax
An appearance can be recorded or in front of a live audience and it can include:
- sports events
- acting in theatre, TV, radio or film productions
- promotional activities
- endorsement of goods or services
- photo calls
- TV and radio interviews
- catwalk modelling at an event where an entrance fee is charged
- TV commercials
Payments that qualify for Withholding Tax
The payment does not have to have a direct connection with the UK appearance. For example, endorsement fees paid to a tennis player to use particular equipment in a UK tournament would be counted. Payments could include:
- appearance fees
- fees to models for appearances in adverts on TV or the web
- fees paid to models for cat-walk events where an entrance fee is charged, including extra payments for the live streaming or recording of the event
- extra payments linked to appearances (such as shares of box office sales), no matter when they are paid
- achievement bonuses
- exhibition income
- box office percentages
- TV rights
- broadcasting/media fees
- tour income
- prizes, such as a car
- advertising income
- merchandising income
- endorsement fees
- film fees
When you don’t have to pay Withholding Tax
You do not have to deduct Withholding Tax on a payment:
- that is a cancellation fee
- if the total of all payments to the performer is below the personal tax threshold
- to an employee using the Pay as You Earn (PAYE) scheme
- made direct to anyone on the list of Approved Promoters, Agents and Merchandisers (Rock and Pop)
- made to anyone on the list of eligible artists or agents in the simplified tax system for classical music
- for copyright, royalties or advances on royalties
- directly to other people for supporting services such as; venue or equipment hire, ticketing, security or catering
- to models at still photographic shoots
- to a catwalk model at an event not open to the paying public, even if that event is filmed or streamed
- made directly to directors, cameramen or technicians
Do not deduct Withholding Tax on payments made for sales of audio recordings in any format (eg digital downloads, USB sticks, CDs, vinyl records, cassettes) if the payments relate to either:
- the proceeds of sales
- a non-returnable advance on future sales
- sales at a live performance
Working out Withholding Tax
For most payments over the personal allowance, deduct 20%.
If you will make several payments that you know in advance will exceed the personal allowance in total, start deducting tax from the first payment, even if the personal allowance has not yet been reached.
Your contract with a dancer agrees to pay a total gross of £80,000 split over 20 payments in the year. Tax at 20% is paid as part of each payment. The dancer receives 20 payments of £3,200 and HMRC receives a total of £16,000.
Paying expenses and giving assets
If you pay expenses or give assets as a payment, (such as a car for a ‘hole in one’ in a golf competition) this is treated as if the tax has already been paid (net of tax). You must pay the tax.
To work out how much tax to pay:
- Use the grossing up calculation to work out how much the gross payment would have been to give this (net) payment.
- Work out the tax by applying the relevant tax rate to the grossed up amount.
You buy a £1,000 airline ticket for a singer.
- Gross up the net payment of £1,000 after tax at 20% basic rate as follows:
- multiply net payment (£1,000) x 20 (basic rate 20%)
- divide by 80 (100% - 20%) = £250
- add the tax amount £250 to the net payment £1,000 to get the gross payment = £1,250
- Work out the tax due at the 20% (basic rate) on the grossed up payment of £1,250 as follows:
- £1,250 X 20% = £250 to pay to HMRC
Do not include VAT when calculating Withholding Tax due.
For example, if you are a venue paying the gross ticket sales to a promoter or entertainer, the VAT element of each individual ticket price must be taken out.
How to pay HMRC
You will be sent Form FEU 1 by HMRC for each quarterly accounting period. Use a continuation sheet if necessary. Send the form and payment within 14 days of the end of each quarter.
|Quarter end date||Payment due date|
|30th June||14th July|
|30th September||14th October|
|31st December||14th January|
|5th April||19th April|
Contact HMRC if you have not received a Form FEU 1. You may be charged interest on a late payment. Interest will be calculated from the due date.
Each person making a payment must deduct Withholding Tax.
A promoter arranges for a non-UK resident singer to perform at a UK Venue. The venue pays £100,000 to the promoter (the net box office). The promoter agrees to pay the singer a fee of £60,000.
- The venue pays £80,000 to the promoter and £20,000 Withholding Tax to HMRC. The venue provides Form FEU 2 to the promoter showing these amounts.
- The promoter pays £48,000 to the singer and deducts £12,000 Withholding Tax. The promoter provides Form FEU 2 to the singer showing these amounts.
Because the venue has already deducted £20,000 Withholding Tax, the promoter makes no further payment to HMRC. On the promoter’s FEU 1, the £20,000 paid by the venue is shown as a credit and the FEU 2 form is attached. This leaves the £100,000 split as follows:
- promoter £32,000
- singer £48,000
- HMRC £20,000
The promoter can then use the credit against further payments due to HMRC in the year or claim a refund from HMRC.
You can make a specific agreement with HMRC for one part of a payment chain to take full responsibility to pay the Withholding Tax. All other payments in the chain are then made without deduction. This is known as ‘middleman’ arrangement. If you wish The Foreign Entertainers Unit to consider your request for a middlemen arrangement, write to HMRC Foreign Entertainers Unit. You should include the following information:
- a copy of any contracts for non UK residents
- details of performance venues
- dates of performances
Performers with a reduced tax rate
Withholding Tax is usually worked out at the basic rate (20%). Deductions should be made at this rate unless you receive an authorisation form (FEU 4) from HMRC to do otherwise.
You must record every payment made to an overseas performer. At the end of each 3 month period, show how much tax has been deducted on the 3-part tax deduction certificate form FEU 2. Each part should be completed and dealt with as follows:
Send to HMRC with form FEU 1.
Keep for your own records.
Give to the person you paid.
You must not issue a duplicate if the original certificate is lost.
Refunds and underpayment
If the performer has an underpayment of tax after Withholding Tax has been deducted, HMRC will arrange for any additional tax to be paid directly by the performer.
If there has been an overpayment of tax by a performer after Withholding Tax has been deducted, you do not have to issue a refund. If you choose to do so, you must first retrieve the original FEU 2 then issue a new FEU 2 with the refund.
To make a claim for a repayment, make the request in writing when you return FEU 1. Provide details of the bank account where the repayment should be paid, including the:
- name of account holder
- sort code
- account number