BBC Gets the Public Sector Treatment

On-air and radio presenters to undergo new test

Following pressure exerted by the Public Accounts Committee the BBC has announced a new employment status test as recommended by an independent review of all freelance engagements but with specific focus on the use of personal service companies (PSC) by on air talent, carried out by accountants, Deloitte LLP.

Deloitte's report, published last week, found no evidence that the Corporation engaged PSC's to avoid tax or NIC nor that it directly advocated the use of PSC's. Many of the files reviewed showed that the BBC had offered individuals staff contracts or PSC contracts but following negotiations on- air talent had been reluctant to join the staff.

Although a forensic review of freelancer engagements was not conducted, Deloitte found the BBC's policies to be well developed and effective in achieving a high standard of tax compliance in this area. There were however inconsistencies in its contracting policy and, in particular, there were instances of presenters in very similar roles engaged on staff contracts, as sole traders and via PSC's.

PSC's are the default choice for long term engagements where employment has not be considered as an alternative which, according to Deloitte's broad experience from working in the broadcasting industry, is not the position adopted by other film, TV or production companies. Although these companies will happily use PSC's, they are more prepared to engage on-air talent on a sole trader basis. The volume of contributors the BBC utilises on an annual basis however is significantly greater than these organisations and the Beeb is risk averse in order to protect the licence fee fund. To assist the corporation in managing this risk more effectively through appropriate status classification, with less reliance on PSC's, Deloitte recommend a new policy be adopted that incorporates an unambiguous employment status framework.

The new employment status test, which the BBC will work with HMRC to develop, will help the corporation move away from the practice of engaging on-air talent on long term contracts via PSC's, when employment would be more appropriate. Although the test will be based around all relevant employment status tests, there will be four core principles which are particularly relevant to the broadcasting industry:

1. The length of the engagement
2. The certainty of work provided by the BBC
3. The manner of payments from the BBC and the proportion of income earned elsewhere
4. The extent to which the BBC exercises control over the way duties are performed

As a matter of priority, 804 freelance talent paid in excess of £50,000 in 2011/12 as identified by Deloitte, will be subjected to the new test. Of these it is estimated that 131 individuals could be offered staff positions when their current contracts expire. These may well be the people that the public consider to be the 'face or voice of the BBC' and who might ordinarily be expected to be employees.

It is intended that the changes will become effective from the 6th April 2013.

Taking their lead directly from the recent public sector appointee rules, the BBC will be incorporating the following changes to all relevant contracts:

• Specific reference to the legislation by which tax and NI is due;
• A requirement that contributors be obliged to provide the BBC with evidence of compliance with such legislation on request; and
• An ability for the BBC to terminate the contract if there is non-compliance either with the legislation or failing to respond to any BBC request for information.

So the politicians having got their way, it is probably reasonable to expect that Local Government will be next to be forced to tow the line?