Written evidence submitted by Directors UK

About us:

  1. Directors UK is the professional association of UK screen directors. It is a membership organisation representing the creative, economic, and contractual interests of over 7,500 members — the majority of working TV and film directors in the UK.


  1. Directors UK collects and distributes royalty payments and provides a range of services to members including campaigning, commercial negotiations, legal advice, events, training, and career development. Directors UK works closely with fellow organisations around the world to represent directors’ rights and concerns, promotes excellence in the craft of direction and champions change to the current landscape to create an equal opportunity industry for all.


  1. We welcome the opportunity to contribute to the Treasury Committee inquiry looking at Tax After Covid. We are not experts in taxation however our response highlights some of the core issues regarding taxation and work status which affect Directors UK members working as self-employed freelancers in the UK screen sector, which we believe need to be addressed.


Review the tax and employment status of self-employed/freelance workers

  1. The Covid-19 crisis has exacerbated many of the inherent flaws in the current taxation and employment system that does not recognise or reflect the working model of the self-employed freelancer. We believe there needs to be a wholesale review of the tax and employment status of self-employed workers, with improved monitoring and recognition of the freelancer workforce by HMRC, government and industry.
  2. The Creative Industries have a high proportion of self-employed workers: 33% (694,000) of the 2.1 million in the creative industries and almost 50% (332,000) of the 676,000 in culture, compared to 15% (5 million) of the country’s workforce as a whole. Over 20% of all the self-employed people in the UK work in the cultural and creative industries. It is critical to the ongoing success of the creative economy that the workforce and their tax and employment status is better understood and supported.
  3. At the beginning of the Covid crisis the Government focused its financial support on targeting the largest sections of the country’s workforce, with measures that could be rolled out swiftly to ensure that support was available as quickly as possible to the largest number of people. This was done effectively through the HMRC system for PAYE employed workers. However, those self-employed individuals whose employment and tax status falls outside the traditional PAYE system, who legitimately operate within the parameters of employment and tax rules but whose status is harder to track, have been left to fend for themselves as they fell between the gaps of both the SEISS rules and the CJRSSelf-employed and freelance workers feel that they have been harshly penalised, particularly as they do not ordinarily have any of the other employment benefits or usual stability of employment of a PAYE employee, but pay their taxes
  4. The challenges faced by the Treasury and HMRC in their efforts to devise and deliver support measures for self-employed sections of the workforce during the pandemic have very effectively highlighted the urgent need for harmonisation between tax and employment status to reflect the realities of the modern world of work. There is a need for an urgent review of how the different status of workers are treated to ensure the tax system is effective and more balanced. There is no longer a “one-size fits all” approach that covers the different ways people are engaged to work. 
  5. Any such review would need to recognise the differences between employment practices in different sectors. For example, for the vast majority of freelancers in film and television working in the creative sector there is little to no choice but to become self-employed if you want to gain work and sustain a career. Industry restructuring over recent years means there are limited to no prospects of being offered permanent employment in TV production as this has predominantly moved to a freelance, contract based model of employment that suits the short-term, project-based nature of the work. Sometimes freelancers are engaged on short-term PAYE contracts, but often they are required to operate via a Public Service Company (PSC)/Limited Company by their hiring company as a way of protecting the employer from any standard obligations of employment (e.g. sick pay, holiday, national insurance, maternity etc) leaving the worker more vulnerable. 
  6. For freelancers operating via their own Personal Service Company/Limited company they are usually advised by their accountants to receive their remuneration mostly in the form of dividends from the profits of their company. However, the law currently does not regard dividends as the earnings or profits from trade, so when it came to assessing incomes for eligibility for the SEISS, individual freelancers working as a PSC could not use their dividend earnings, only the smaller amount paid as PAYE earnings could be tracked. This means that many self-employed workers have only been able to access financial support for a fraction of their real income and have struggled to pay their basic living expenses as a result.  This is despite the current taxation system supporting this way of operating, and self-employed people contributing taxes via both corporation tax as well as income and dividend tax. While there is a negligible tax advantage (which has decreased in recent years with rising dividend taxes) this is clearly offset by the substantial lack of employment rights and insecurity of being a freelancer and micro business, including no paid holiday or bank holidays, no employer pension contributions, no sick pay, no cancellation fees, no legal protection, no pay for additional hours worked, no maternity benefits. As self-employed workers they also experience patterns of employment that are insecure, unpredictable and their pay is often irregular.
  7. Some self-employed freelancers find themselves moving between PAYE fixed-term contracts and being contracted through their PSC/Limited company to suit the requirements of the employing company. Again, these individuals found themselves outside of the SEISS and CJRS support as the systems could not adequately track their entire income via their different employment status.
  8. The inherent difficulties in readily identifying and adequately supporting the self-employed workforce in the Creative Industries during the Covid pandemic has revealed gaps in understanding in both how they are engaged and the specific needs that come out of this. The crisis has reinforced the need for a wholesale review of how the self-employed, freelancer workforce is monitored, categorised, engaged and supported in the future given this group of workers are growing faster than any others according to DCMS figures[1]. It is imperative that the Government and the industry understand how the creative workforce is being engaged in work and how it can be more effectively tracked and supported in the future, particularly in light of the high chance of future pandemics. For example, updating self-assessment forms to capture more detailed dividend data to enable HMRC to easily distinguish between dividends earned as a result of an individuals PSC/Ltd company, compared with dividends earned from investments, would have allowed thousands more self-employed people to receive the appropriate financial support during Covid, something accountants have advised us should be relatively easy to do going forwards but would require re-programming of the Self-Assessment forms. The apparent unwillingness of the government to explore one of the few existing mechanisms between HMRC and freelancers due to “technical complexities” is significant and requires further exploration of how the dividend certification system could be used to reach more freelancers who have been unsupported.
  9. Directors UK contributed to work undertaken by the Creative Industries Federation in June to explore how the Creative Industries could be changed post Covid-19. The 12 recommendations in their report “Creative Coalition: A Plan to Reimagineincluded ensuring that freelance contracts take into account the need for pension savings, sick pay, and compensation for periods of unemployment[2].
  10. The issues affecting the self-employed are further exacerbated by the forthcoming introduction of IR35 into the private sector, which although delayed until April 2021, is creating additional anxiety and confusion among the self-employed who are concerned that their employment status or work opportunities may be affected by the new rules. IR35 also adds uncertainty for employers as to how to apply the rules. For some TV directors such as those working in genres, such as continuing dramas (Soaps) or multi-camera entertainment shows, there is a relatively small pool of employers who they can work for. They often rotate around these employers, or work on a number of different production contracts for one over-arching employer (e.g. BBC, ITV), but the project-led nature of this work means it is not possible for this to be a permanent role. For many freelance directors, who have no choice but to be freelance, the introduction of IR35 feels like they are being penalised for a system not of their making.
  11. Directors UK contributed to HMRC discussions on how to make IR35 work in practice, and as a result the new rules confirm that directors are one of a large number of freelance roles in film and TV which are considered to be self-employed for tax purposes. However, there is still some concern and confusion as to how the guidelines will be interpreted in practice, particularly as employers will become responsible for the first time for clarifying the employment status of everyone they engage. The employer is required to review the employment status of an individual and “consider whether, if the engager re-hires the same person for further engagements, each of those engagements continues to be a separate agreement, or if the parties have created an overarching agreement for a longer term commitment to each other. As almost all freelancer director engagements are on a one-off basis, it is unlikely such a commitment will exist for freelance directors unless they have specifically entered into a long-term contract with an employer. However, many self-employed freelancers in the creative sector are concerned about how these imminent changes will affect them. There is concern that companies will be heavy handed and by default opt to put freelancers on PAYE for fear of going against the rules. With companies not wanting to have permanent staff on their books, and many self-employed creatives not wanting permanent roles, they are concerned as to how this will affect their employment prospects.


Tax Reliefs

  1. Tax Reliefs in the form of Film and High-end TV Tax Relief schemes, and the schemes to support animation, children’s television and video games have helped to grow these sectors and contribute to the economy and to job creation in the UK. A 2018 BFI commissioned report[3] found that:
  1. An estimated £632 million in tax relief seeded £3.16 billion in direct production spend in 2016. UK-made productions generated £7.9 billion as the screen sector’s overall economic contribution (GVA), including £2 billion in tax revenues. Production spend which would not take place without the tax reliefs, known as additionality, doubled GVA to £4.1 billion in 2016.
  2. Between 2007 and 2016 expenditure on feature film production in the UK doubled from £849 million to £1.72 billion in 2016 after the film tax relief was introduced.
  3. High-end television production also boomed following the introduction of the high-end tax relief in 2013, with expenditure more than doubling in the first three years from £414.9 million to £896.7 million.
  4. The video games tax relief which came into effect in 2014 supported £389.9 million of development expenditure in 2016, up from £228.8 million in 2015.
  5. The animation and children’s television tax reliefs generated expenditure of £97.1 million and £61.0 million, respectively. 
  1. The Government could consider further fiscal support for film and television production to expand it beyond the current mediums and genres to support a broader range of content going into development and production. However, any tax relief proposals will need to be matched with robust projections/evidence of the investment it is likely to attract above and beyond what was anticipated without stimulus. In addition, Covid and Brexit trade talks will inevitably both have considerable impacts on the use of tax relief in the short and medium term and need to be factored into any review.


  1. The Government should also consider tax reliefs at an individual level as well as sectoral. How could the self-employed/freelancer workforce, who have largely been excluded from financial support during the pandemic, be supported back to work through tax incentives that make them more appealing to hire. Given that employers have been incentivised to retain staff through the Job Retention Bonus scheme, and there are proposals such as that from the Institute of Directors[4] who are calling on the Treasury to reduce employment costs by raising the Employment Allowance and reducing NIC, we would argue that similar economic incentives to support the hiring of freelance workers who have been disproportionately affected should also be explored.


  1. In addition, the Government should examine whether further extension or flexibility of the Research & Development (R&D) tax relief could provide further temporary relief for struggling creative individuals and businesses. Currently R&D tax relief only supports innovation in science and technology; however, we believe this should be extended to include R&D in the creative sector. Many directors, like other freelance creatives, spend a large amount of their time undertaking R&D, writing and developing ideas for future creative works and usually earning no income during this period, yet once an idea has been picked up and goes into production it yields future work opportunities and revenues for the many (often hundreds) of people who then work on the production and contribute revenues to the UK creative economy. We would urge the Government to consider the proposal, advocated by Baroness Bull[5] and the Creative Industries Federation[6], to adopt a broader definition of research and development that includes, and incentivises, research and development investment in the creative industries, as way of supporting future project generation and work.

Tax reform

  1. 'Never let a good crisis go to waste'. The pandemic has revealed in stark details both the strengths and the weaknesses of the current taxation system and in doing so offers a once in a lifetime window for radical and overdue reform. Whilst 'winners' in this situation are hard to identify, the losers are not and the Government must take the opportunity to review the tax system specifically in regard to the fastest growing section of the workforce, namely the 3 million freelance/self-employed workers who are currently falling through the gaps in support but who make vital contributions to the economy across all of its sectors.


  1. Much work has already been completed around the shifts in working models that have taken place in the last 20 or more years but the system has yet to respond in a wholesale way that ties together the incongruence between the tax and employment statuses that plague freelance workers and remain outside of their control.


  1. In March, the Chancellor announced his economic support package in response to Covid-19 and it is in this spirit that the UK's taxation and employment system should be reviewed.


“This is not a time for ideology and orthodoxy. This is a time to be bold. A time for courage...We will support jobs, we will support incomes, we will support businesses, we will help you protect your loved ones. We will do whatever it takes.”[7]


  1. The ability of an individual to seek work, gain employment, earn an income and be supported, when they are prevented from doing this due to reasons beyond their control, are fundamental to the Government delivering on this promise beyond the pandemic and for a healthy economic recovery.


  1. Tax reform should start with a consultation that openly acknowledges that the current framework is not fit for purpose as it has failed to keep up with the seismic change that has taken place across the last 2-3 decades in terms of working patterns and practices. Not least the emergence of the gig economy where a more agile, mobile, and growing section of the labour market is entering into temporary, short term contractual work. A situation which has yet to be reviewed and as such is leaving many workers open to job insecurity, poor practices, and exploitation. The Matthew Taylor “Good Work” [8] report provides a place to start considering how this might be addressed through an expanded concept of how those in work are viewed and treated.


  1. We would also advocate for the continued involvement of professional organisations, guilds and unions that effectively engage with and represent the creative workforce, as being a key crisis learning outcome that will support a stronger recovery. There is still some way to go to ensure that perspectives from the workforce are adequately represented in devising and delivering support measures and recovery interventions. 


  1. Along with fellow organisations representing individual creators - ALCS, BECS, DACS, Equity, the Musicians Union, Royal Society for Literature, Society of Authors and the Writers Guild of Great Britain (WGGB) we have contacted DCMS about an initiative put forward over the past 18 months, which we believe is now more important than ever: the establishment with DCMS of a “UK Creators Council” to inform and assist policy-making, enabling Government to hear the creators voices directly.  Along with other representatives in the creative economy, Directors UK is willing to offer our support to the DCMS and Treasury, and to make available our contact channels with our many thousands of members in these difficult times and going forwards. 


August 2020



[2] https://join.creativeindustriesfederation.com/reimagine/

[3] https://www.bfi.org.uk/news-opinion/news-bfi/announcements/new-report-shows-uk-tax-reliefs-help-fuel-boom-uk-screen, 2018

[4] https://www.iod.com/news-campaigns/news/articles/Treasury-must-act-to-support-jobs-and-investment

[5] https://hansard.parliament.uk/lords/2020-01-08/debates/AD2A3F4D-AFD7-4F16-BF5A-60C191BABCCA/CreativeIndustriesResearchAndDevelopment

[6] https://join.creativeindustriesfederation.com/reimagine/

[7] https://www.gov.uk/government/speeches/chancellor-of-the-exchequer-rishi-sunak-on-covid19-response

[8] https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices