Our client, a successful French recording artist, is a US resident taxpayer. In 2022 she performed on a short tour of the UK earning a total guarantee of $80,000. As a performer appearing in the UK special tax rules apply which mean her gross income is subject to 20% withholding tax, in this case $16,000.
This does not take into account any of her allowable tour expenses and would have a significant impact on her cash flow and ability to fund the tour. It could also mean our client cannot fully relieve the UK withholding tax credit in the US, as she is required to mitigate her exposure to overseas tax.
It is possible to avoid this outcome and an arrangement, known as a reduced tax payment application, can be negotiated in writing between the UK tax authorities and the promoter, payer or entertainer. This arrangement allows the payer to deduct an amount that is less than the 20% default rate of withholding tax. The reduced rate of tax is reached by providing detailed information in respect of the individual’s personal tax situation and agreeing a position in respect of the tour expenses/budget.
We therefore negotiated a tax clearance with the UK tax authorities on her behalf, which resulted in the total tax liability being reduced to $3,000. This also meant all of her UK tax compliance obligations were met and the UK tax credit would be fully credited against her tax liabilities in the US.
This type of scenario is common for many of our clients and mainly applies to non-resident musicians, actors, entertainer, models and sportsmen appearing or performing in the UK.
