Freelancers are paid ‘in accordance with HMRC guidelines’
Most ‘freelancers’ working for the BBC also work for a number of other organisations, and the use of personal service companies is ‘in no way designed to reduce the tax they pay’, the BBC said on Friday.
Some tax professionals were critical of a Public Accounts Committee report which declared that the BBC ‘has identified 25,000 off-payroll contracts … but cannot provide any assurance that these individuals are paying the correct amount of tax’.
Short term engagements are ‘commonplace’ in broadcasting, and the BBC paid about 25,000 people off-payroll ‘in a year’, the report said. The BBC has 3,000 contracts with personal service companies.
The PAC said it was told that 148 of the BBC’s 467 presenters are employed through personal service companies ‘despite them often being employed long-term, and the BBC acknowledged that their contracts can share characteristics with typical PAYE contracts’.
The BBC said late on Friday that it pays all full time staff with tax deducted at source, and ‘this includes all senior managers’.
A spokesperson said: ‘We also work with freelancers, such as camera crews, make-up artists, actors, singers and presenters, most of whom work for a number of employers. All our freelancers are paid in accordance with HMRC guidelines and we stipulate in our contracts that the appropriate amount of tax must be paid on any BBC earnings. None of our processes is designed to reduce the amount of tax paid by the BBC or by the freelancers themselves.
‘In line with HMRC guidelines, certain freelancers are paid through service companies. It is the BBC's preferred option for freelancers paid more than £10,000 a year and in many cases it will be the only option available to them if they work at the BBC.
‘It is in no way designed to reduce the tax they pay. We submit an annual report on all our freelance payments to the HMRC, who have the ultimate responsibility to ensure freelancers are paying the correct amount of tax on all their earnings. Nevertheless, the BBC has launched an independent review of all such arrangements. If we feel it is right to make any changes as a result of this review we will do so.’
Anti-avoidance rule
The anti-avoidance legislation ‘IR35’, introduced in 2000, is designed to eliminate avoidance of tax and NICs where, in the absence of the personal service company, the relationship between the worker and the organisation engaging him or her would have been one of employment.
As Tax Journal reported yesterday, David Whiscombe, director at chartered accountants Berg Kaprow Lewis, said there was ‘no legal, moral, social or other reason’ why genuine freelancers should not trade through a limited company ‘like any other self-employed person’. If they are disguised employees, he added, there is ‘already anti-avoidance [IR35] legislation in place which prevents any loss of tax’.
Cormac Marum, head of tax advisory at Harwood Hutton, said MPs on the committee had ‘got themselves confused’ on tax. ‘The BBC are not complicit in tax avoidance and are not helping any employees avoid tax by paying on-screen presenters through personal service companies,’ he said.
‘The BBC could decide to employ people as on-screen presenters and fork out an extra 13.8% of the licence payers’ money for the privilege and have all the other potential costs of being their employer. Sensibly the BBC exercises its freedom not to waste licence fee money in this way. It would only result in fewer such presenters being on our screens and the quality of the BBC being eroded further. Instead the BBC, quite legitimately, freely decides not to have these individuals as employees at all so that the licence payers’ money can go further.’
However, today’s editorial in The Independent called on the BBC to ‘put its tax house in order’.
‘Where the individuals concerned work for several organisations, [the personal service company arrangement] can be justified, but not where the beneficiaries are the public faces of the BBC,’ it said.
‘Legal such contracts may be, but they set up an artificial distinction between BBC employees and offer financial advantages – including to the corporation, which does not pay national insurance for those not paid as "staff".’
IR35 investigations
The PAC noted that in recent years the number of IR35 investigations carried out by HMRC had decreased from over 1,000 in 2003/04 to 23 in 2010/11, but the department planned to increase the number of such investigations ‘ten-fold’ this year. Investigations were opened into 59 organisations in 2011/12.
Lin Homer, HMRC’s chief executive, told the PAC in July that HMRC was ‘achieving a certain amount through the deterrent effect of the legislation and a certain amount through the work we do, particularly with big organisations’.
She added: ‘One has to give credit to the tax professional industry, which will stay abreast of what is happening, and many will be giving [guidance on IR35] direct to their clients.’
Freelancers are paid ‘in accordance with HMRC guidelines’
Most ‘freelancers’ working for the BBC also work for a number of other organisations, and the use of personal service companies is ‘in no way designed to reduce the tax they pay’, the BBC said on Friday.
Some tax professionals were critical of a Public Accounts Committee report which declared that the BBC ‘has identified 25,000 off-payroll contracts … but cannot provide any assurance that these individuals are paying the correct amount of tax’.
Short term engagements are ‘commonplace’ in broadcasting, and the BBC paid about 25,000 people off-payroll ‘in a year’, the report said. The BBC has 3,000 contracts with personal service companies.
The PAC said it was told that 148 of the BBC’s 467 presenters are employed through personal service companies ‘despite them often being employed long-term, and the BBC acknowledged that their contracts can share characteristics with typical PAYE contracts’.
The BBC said late on Friday that it pays all full time staff with tax deducted at source, and ‘this includes all senior managers’.
A spokesperson said: ‘We also work with freelancers, such as camera crews, make-up artists, actors, singers and presenters, most of whom work for a number of employers. All our freelancers are paid in accordance with HMRC guidelines and we stipulate in our contracts that the appropriate amount of tax must be paid on any BBC earnings. None of our processes is designed to reduce the amount of tax paid by the BBC or by the freelancers themselves.
‘In line with HMRC guidelines, certain freelancers are paid through service companies. It is the BBC's preferred option for freelancers paid more than £10,000 a year and in many cases it will be the only option available to them if they work at the BBC.
‘It is in no way designed to reduce the tax they pay. We submit an annual report on all our freelance payments to the HMRC, who have the ultimate responsibility to ensure freelancers are paying the correct amount of tax on all their earnings. Nevertheless, the BBC has launched an independent review of all such arrangements. If we feel it is right to make any changes as a result of this review we will do so.’
Anti-avoidance rule
The anti-avoidance legislation ‘IR35’, introduced in 2000, is designed to eliminate avoidance of tax and NICs where, in the absence of the personal service company, the relationship between the worker and the organisation engaging him or her would have been one of employment.
As Tax Journal reported yesterday, David Whiscombe, director at chartered accountants Berg Kaprow Lewis, said there was ‘no legal, moral, social or other reason’ why genuine freelancers should not trade through a limited company ‘like any other self-employed person’. If they are disguised employees, he added, there is ‘already anti-avoidance [IR35] legislation in place which prevents any loss of tax’.
Cormac Marum, head of tax advisory at Harwood Hutton, said MPs on the committee had ‘got themselves confused’ on tax. ‘The BBC are not complicit in tax avoidance and are not helping any employees avoid tax by paying on-screen presenters through personal service companies,’ he said.
‘The BBC could decide to employ people as on-screen presenters and fork out an extra 13.8% of the licence payers’ money for the privilege and have all the other potential costs of being their employer. Sensibly the BBC exercises its freedom not to waste licence fee money in this way. It would only result in fewer such presenters being on our screens and the quality of the BBC being eroded further. Instead the BBC, quite legitimately, freely decides not to have these individuals as employees at all so that the licence payers’ money can go further.’
However, today’s editorial in The Independent called on the BBC to ‘put its tax house in order’.
‘Where the individuals concerned work for several organisations, [the personal service company arrangement] can be justified, but not where the beneficiaries are the public faces of the BBC,’ it said.
‘Legal such contracts may be, but they set up an artificial distinction between BBC employees and offer financial advantages – including to the corporation, which does not pay national insurance for those not paid as "staff".’
IR35 investigations
The PAC noted that in recent years the number of IR35 investigations carried out by HMRC had decreased from over 1,000 in 2003/04 to 23 in 2010/11, but the department planned to increase the number of such investigations ‘ten-fold’ this year. Investigations were opened into 59 organisations in 2011/12.
Lin Homer, HMRC’s chief executive, told the PAC in July that HMRC was ‘achieving a certain amount through the deterrent effect of the legislation and a certain amount through the work we do, particularly with big organisations’.
She added: ‘One has to give credit to the tax professional industry, which will stay abreast of what is happening, and many will be giving [guidance on IR35] direct to their clients.’
