£33m tax bill threatens to close British orchestras

A multimillion-pound National Insurance bill over the tax status of freelance
musicians, if collected, could spell the end of British orchestras forever.

HM Revenue & Customs has demanded an estimated £33m in unpaid NI
contributions, as well as an annual liability of £6m, and has warned orchestras
across the UK that they could be closed if the bill remains unpaid.

The Times reported that Russell Jones, director of the Association
of British Orchestras sent a confidential email to the heads of the country’s 55
main ensembles stating that ‘many orchestras would close and there would be very
serious financial implications for others’.

British orchestras, have, since their foundation, been formed entirely of
freelance musicians, and have therefore traditionally paid lower NI
contributions than employers would for regular, salaried workers.

But in 1998 the government changed regulations for ‘entertainers’ in order to
benefit actors and freelancers. The idea was that employers would pay higher
levels of NI and actors would then be able to claim jobseekers’ allowance while
‘resting’; the benefit being funded by the increased NI contributions.

As a result of the change, The Guardian reported that the
Philharmonia Orchestra could be forced to pay an extra £500,000 tax a year, plus
arrears backdated to 2000. In the case of the London Symphony Orchestra, the
back-payments would amount to £8m.

A HMRC spokesman denied that it would be seeking to close down the nation’s
musical life and said it had an ‘excellent track record’ for agreeing ‘time to
pay’ arrangements with its customers when they need it, ensuring that bankruptcy
was rare. ‘Consequently, we do not believe that any orchestras will need to
close,’ he added.

Over the past six years, orchestras have benefited from more than £35m of
additional funding from the Arts Councils of England, Scotland and Northern
Ireland. That benefit could now be wiped out if Revenue and Customs carries out
its threat.