UK live industry cautiously welcomes 2021 budget
The UK’s live music industry has welcomed many of the provisions contained in the 2021 government budget, presented this afternoon by chancellor of the exchequer Rishi Sunak, but expressed its disappointment at the continued lack of a European-style insurance scheme for festival organisers.
Among the measures unveiled by Sunak in the Commons today (3 March) are an extra £300 million for the Culture Recovery Fund (CRF), ‘restart grants’ for hospitality/leisure businesses, the extension of the coronavirus job retention scheme (furlough) and self-employed income support (SEISS) schemes, and business rate relief.
The budget also confirmed an extension of the 5% rate of VAT on ticket sales – a key campaign focus for pan-industry group LIVE (Live music Industry Venues and Entertainment) and the whole UK concert industry – for a further six months, with an interim rate of 12.5% until April 2022.
Paul Reed, CEO of the Association of Independent Festivals, says: “We warmly welcome the extension to the reduced VAT rate on tickets, which will really help festivals during the 2021 sales cycle. For many AIF members, this is the first period in which they are selling tickets since the outset of the pandemic. We do, however, reiterate the recommendation of the DCMS select committee for VAT on ticket sales to remain at a reduced rate for three years so that the UK festival sector can fully recover.
“The Culture Recovery Fund has been a lifeline for many of our members so it’s greatly encouraging to see a further £300m invested into this, though we would appreciate some further detail on this additional round and the time period it will cover.
“Independent festival organisers would much rather mobilise their staff to plan a full and successful festival season this summer”
“We also welcome the extension to the government’s furlough scheme and continued support for the self-employed. However, independent festival organisers would much rather mobilise their staff to plan a full and successful festival season this summer. As we have repeatedly stressed, the only way they can do this is with a government-backed insurance scheme that covers Covid-19-related cancellation. The chancellor today confirmed the extension of the government backed restart scheme for film and TV productions – a similar safety net needs to be put in place before the end of March to avoid mass cancellations throughout the UK’s festival market.”
Lucy Noble, chair of the National Arenas Association, comments: “For the live music industry, today’s budget, and specifically the extension of furlough to September, is enormously welcome. The whole sector has been grateful for a 21 June ‘not before’ date for operating at full capacity, and the extension of the 5% VAT rate on tickets is something we had been hoping to see.
“Uncertainty remains, and the lack of insurance for Covid-related cancellation is a huge concern – what the entire live sector wants is to be allowed to trade safely out of this situation and once more welcome people to come together for extraordinary shared experiences.”
“Music Venue Trust welcomes the extensions to furlough, SEISS and the VAT cut on ticket sales,” says MVT CEO Mark Davyd. These measures are supportive of the next steps in the campaign to reopen every venue safely. On business rates, we note that the Chancellor has provided a 100% cut for the initial three-month period in which venues will not be trading. This period does not resolve the long running debate on business rates, and we look forward to a full discussion of this outdated and anachronistic taxation in the business rates review in Autumn 2021.
“The chancellor announced additional funding to be distributed by Arts Council England [ACE], but the purpose of this funding is unclear; we hope to work with ACE and DCMS to ensure it is effectively distributed, and includes sensible and structured capital investment that enables our music venues to become more Covid-secure.”
“The needs of those in mixed employment, and those individuals operating as limited companies, were not met”
Annabella Coldrick, chief executive of Music Managers Forum, says: “The MMF welcomes the extension of eligibility for support to the self-employed. This is a really important measure that should have an impact on our community and their clients, many of whom faced real hardship during the pandemic, although unfortunately directors of limited companies are still excluded. We also welcome the £300m Cultural Recovery Fund for reopening, although it was disappointing not to hear any developments on government-backed insurance for live music events which is urgently needed to get us back up and running in July.
For a full longer-term music recovery, to a place where artists can perform to full capacity crowds and tour internationally, we will need this kind of targeted and continued support reaching into 2022.”
“We welcome the continuation of support for employers and self-employed workers, as well as the addition of those newly self employed sole traders; this is tempered by the disappointment that the needs of those in mixed employment and those individuals operating as limited companies were not met,” adds Dave Keighley, chair of the Production Services Association.
“Support for companies is also broadly welcomed, although doubt over whether business rate relief applies to our members that support hospitality and leisure remains. Any discounts given to venues should be clearly extended to those companies that work in those venues, recognising that live events are an ecosystem that needs complete support. Although the extension of the 5% VAT rate helps, it needs to be extended to assist our sector’s recovery.
“The extension to the Culture Recovery Fund is encouraging, we hope that the current and subsequent rounds will support event more of our member companies that support cultural activity.”
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UK biz reacts as furlough scheme extended until 2021
Furloughed Britons will continue to receive up to 80% of their salaries until the end of March 2021 under an extension of coronavirus job retention scheme (CJRS).
The extension, announced today (5 November) by the chancellor of the exchequer, Rishi Sunak, comes the day England is locked down for another four weeks to slow the second wave of Covid-19.
The furlough scheme was initially set to run until October, and was previously extended until 2 December.
Also extended today is the self-employment income support scheme (SEISS) for freelancers, with a third grant (covering November to January) calculated at 80% of average trading profits, up to a maximum of £7,500.
The move – which comes just two weeks after the At a cliff edge report warned more than 26,000 full-time jobs will be lost before the end of 2020 without an extension to existing support measures – will save thousands of live music jobs.
“I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK, and that has meant adapting our support as the path of the virus has changed,” comments Sunak (pictured). “It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support.
“Extending furlough … will give people and businesses the certainty they need over what will be a difficult winter”
“Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter.”
The furlough extension follows other support measures previously announced by the chancellor, including cash grants of up to £3,000 per month for businesses which are closed, £1.1 billion for local authorities, an extension to government-backed loan scheme, and an extension to the mortgage payment holiday for homeowners.
Stuart Galbraith, CEO of Kilimanjaro Live and vice-chair of the Concert Promoters Association, comments: “We are very pleased with the extension of the furlough scheme to the end of March 2020. This will give businesses a very valuable opportunity to keep hold of skilled staff despite not being able to trade under current restrictions.
“While it is also encouraging to see a better deal for the self-employed, we know more needs to be done to support the wide range of freelancers in the music industry and we will continue to push government to make more help available to them.”
Michael Kill, CEO of the Night-Time Industries Association, adds: “While the crisis deepens and we move into a national lockdown for 28 days, we welcome the somewhat belated furlough update until March next year.
“The furlough scheme will absolutely help preserve jobs within the sector, but the challenge still remains: where there is still a considerable void in financial support for night time economy businesses, will there be jobs to go back to?”
“This will give businesses a very valuable opportunity to keep hold of skilled staff despite not being able to trade under current restrictions”
He adds: “We appreciate that safety is paramount, but at some point we’ve got to consider the human element here and the immense pressure that individuals, venues owners, staff and freelancers are under at the moment, given the current financial, economic, cultural and social wellbeing environments that are being presented by government, particularly around our sector.”
Deborah Annetts, of the Incorporate Society of Musicians (ISM), particularly highlights the benefits of extending SEISS to many, though not all, of its members. “We are delighted that the government has extended the coronavirus job retention scheme until the end of March and is increasing support for the self-employed to 80% of trading profits across the November to January period. These measures represent a positive step towards the government fulfilling its commitment to deliver parity between employed and the self-employed,” she comments.
“Today’s announcement is the third change to the SEISS in a short period, following the ISM’s tireless campaigning on this issue. We told the government that their initial approach was insufficient and they have listened, benefitting thousands of musicians who cannot work while performance venues remain closed.
“However, as we have said each time the government changes the level of SEISS, the grant only benefits those able to receive it. An estimated three million self-employed workers continue to be excluded from receiving it at all, so expanding the eligibility criteria remains essential for preventing an exodus of highly skilled talent from our world-leading arts sector.”
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Support for UK freelancers: Close, but no cigar
Following the introduction of the job retention scheme (JRS) to provide support for employers and employees during the pandemic-induced downturn, the UK’s chancellor of the exchequer, Rishi Sunak, faced mounting pressure to introduce similar measures for the UK’s self-employed. Voila, on 26 March, the chancellor announced the self-employed income support scheme (SEISS), purportedly covering at least 95% of the UK’s 5 million self-employed workers.
While this is a massive handout from the government which will likely serve as a lifeline for thousands of freelancers in the coming weeks, the scheme’s limitations has raised concerns. The government will effectively be withholding substantive support from significant sections of the freelance population in the live music industry, many of whose livelihoods have effectively dried up overnight, including any freelancer who runs a loan-out company (ie a personal service company, whereby they are both the owner-director and sole employee) and takes their profits out by way of both dividend and salary.
The lack of government support could potentially have a significant negative impact on the UK’s creative industry, given the prevalence of this model in the sector.
The level of state support provided under both the JRS and SEISS is unprecedented. Those freelancers who meet the qualifying criteria for the SEISS will be able to claim a grant of 80% of their monthly profits based on a calculation of their average monthly earnings over their last three years’ of tax returns, up to a cap of £2,500 per month.
The scheme is initially set to run from 1 March for three months (although may well be extended depending on the length of the lockdown), with a lump payment scheduled to be made to qualifying freelancers in June. However, the qualifying conditions are quite stringent, including that the freelancer’s annual trading profits must be less than £50,000; the individual must have been self-employed prior to 6 April 2019; have suffered a trading loss as a result of Covid-19; and that over half their earnings must have been from self-employed work.
The government will effectively be withholding support from significant sections of the live industry whose livelihoods have dried up overnight
The policy rationale for some of these criteria seems logical. For example, the profits criterion will mean that many successful freelancers, such as senior camera operators, lighting directors and talent on TV and film productions, may not qualify. Arguably, this is a reasonable outcome for a scheme intended to provide a safety net for those freelancers who need it most. Indeed, the chancellor has suggested that the individuals excluded on this basis have an average income of £200,000.
On the other hand, a few of the remaining criteria appear to mean that there is no safety net available to certain classes of freelancers, which may also include those who need it most: First, those freelancers who move regularly between pay-as-you-earn (PAYE) and self-employed engagements have been omitted from the scheme and may not qualify for the JRS if they were not under an employment contract as of 28 February. Second, any new business, ie any freelancer who was not self-employed as of 6 April 2019 will not receive any benefits under SEISS.
Finally, those freelancers running loan-out companies which operate PAYE systems have also been excluded: The government has tried to offer reassurance by stating that these individuals could ‘furlough’ up to 80% of their PAYE income via the JRS (which provides up to £2,500 of ‘wages’ per month to employees).
While this may be genuinely helpful to some, it is unlikely to be a silver bullet in the majority of cases. Most freelancers with loan-outs pay themselves a low salary and take the majority of their income out as dividends. This is the most tax-efficient way of taking their money out of the company and is permitted under the UK’s tax system.
In the context of the UK government’s Covid-19 measures, however, this means that these individuals will not qualify for SEISS and will only receive government support under the JRS calculated by reference to their low salary, not their loan-out’s overall profits. This simply may not be enough for some.
Clearly, both the JRS and SEISS are schemes designed in days that would usually have taken months to develop and launch. Equally evident in the detailed provisions of the scheme is the government’s concern that the benefits available will be abused by some. Nonetheless, neither of these factors should result in schemes that unnecessarily penalise individuals acting within the existing tax rules, as the impact on British industries could be long-lasting.
The scheme unnecessarily penalises individuals acting within the existing tax rules
The short-term and time-bound nature of the live music industry means it is particularly dependent on freelancers. It is therefore important on an individual and sector level that those using loan-out companies are given the financial support they need over the next few months to survive. Some industry commentators believe there will not be a full return to normal in respect of live music events until early 2021, and so this sector may be more impacted than others. It is hoped that the government would continue to provide support for those who need it for so long as there is a business case for it.
When announcing the SEISS, the chancellor made it clear that it had been challenging to provide equivalent protection for employees and self-employed workers given the differences in tax contributions currently. He also indicated that the efforts to compensate both self-employed individuals and employees equally during the Covid-19 pandemic might lead to a renewed focus on tax standardisation in the UK – meaning there are likely to be changes made to the UK’s tax system following the current crisis to even out the tax treatment between the employed and self-employed.
This would certainly be a better time to take considered measures to align the effective tax rates of employees and freelancers; however, any measures that involve increasing the effective tax rate for the self-employed should be designed with care and with their potential impact across all industries, including the media sector, taken into account.
It seems that a post-Covid-19 world will see many changes in working practices and, potentially, how parties contract. For now, however, the enormous efforts made by the British government to provide support for both employed and self-employed individuals during an unparalleled time should be recognised.
At Wiggin we are doing our part to support both the policy initiatives and the industry, collating responses to the scheme from stakeholders across the creative sector and submitting a series of questions and suggestions directly to HMRC’s Covid-19 team. It is to be hoped that, with further consideration and clarification, both the SEISS and JRS can fully achieve their aims.
Ceri Stoner is a partner at media, technology and IP law firm Wiggin LLP.