BBC IR35 Witch Hunt

The moral tax debate continues to rumble on and it is the BBC's turn again to have the ethical finger pointed at them.

This Monday, the BBC's CFO, Zarin Patel and its head of employment tax, David Smith, were quizzed about the use of personal service companies (PSC's) within the corporation by the Commons Public Accounts Committee. It emerged that out of the Beeb’s 467 presenters, 148 broadcasters, i.e. nearly a third, were being paid via PSC's. These 148 are not unique, however, as the BBC engages 25,000 freelancers.

Using contractors discharges the BBC from any PAYE obligations, enabling it to make large savings in Employers NIC. Miss Patel, however, whose annual salary of £337,000 is more than double that of the Prime Minister, denied that the practice of engaging freelancers was tax motivated but rather that it was standard and customary industry practice. Furthermore, without the use of PSC's the BBC would not be able to reduce presenters' salaries by the required 25%, she argued.

Whilst the CFO relented to MP's demands that the BBC reviews the way it engages its workers, accepting that there appeared to be serious concerns, Miss Patel claimed that HMRC had been kept informed at every stage and made a point of referring to IR35. A BBC spokesman also stated that the corporation provides HMRC with a detailed annual report of all payments made to PSC's.

In response HMRC has now announced that it will increase its investigations into PSC's. After admitting that HMRC had only enquired into 23 PSC's, the department's chief, Lin Homer, vowed to increase such investigations 'ten-fold' over the next year.

According to the Daily Mail, Margaret Hodge, Labour MP and chair of the Public Accounts Committee, found 'the scale of the legal tax dodge' shocking. She was quoted as saying, 'The BBC is funded through the taxpayer and licence fee. It makes it entirely unacceptable for anybody to be on a contract that is in any way avoiding tax'. Mrs Hodge believes it is morally improper for the BBC to allow these arrangements and that because it is funded by licence fee payers it has a moral obligation to lead by example.

Jeremy Paxman and Fiona Bruce are amongst a number of household names that are engaged via a PSC but Margaret Hodge refuses to accept that such presenters are freelancers, stating, according to the Daily Mail, 'A lot of people I think are probably on these contracts are the face of the BBC and therefore to pretend that they are anything other than pretty permanent features on television screens and on the radio is pretty naïve.'

Hodge revealed that a presenter of 20 years standing had blown the whistle on the Beeb by telling her that he was threatened by them that if he did not agree to using a PSC his pay would be cut substantially. When he asked for this to be put in writing his request was refused but was assured by the BBC that by using a PSC he was much less likely to be investigated by HMRC.

In 2011 a Freedom of Information request revealed 5 BBC staff earning in excess of £150,000 and 36 earning more than £100,000 were paid through their PSC's. The Daily Mail reported that 6 top BBC presenters earned at least £1 million last year and 16 of its 'top talent' earned at least half that.

At face value it is difficult to see how such presenters would not be disguised employees, e.g. they are subject to close control and their personal service is a requirement of the contract, to name but a couple of employment status factors. Ordinary freelancers have lived with the very real threat of IR35 for over 12 years, so maybe it is about time that HMRC paid closer attention to these TV celebrities as they would appear to be high risk candidates.