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It doesn’t seem that long ago that the BBC found itself in a unique position, enjoying the trust of both the authorities and the watching or listening public. Even the light-hearted reference to the Corporation as ‘Aunt Beeb’ wasn’t disrespectful but hinted at its special, warm and fuzzy place in the British consciousness.
For the current Director-General Lord Hall, those days must almost resemble ancient history.
Already embattled due to controversies about how well (or not) its on-air talent is remunerated, the educational background of its journalists and its editorial impartiality, its reputation has taken a hit over how it engages those who generate the thousands of hours of programming each year.
In recent days, a tax tribunal has ruled against three news presenters who had taken on HMRC over a total bill of more tha £900,000.
The case involving Joanna Gosling, David Eades and Tim Willcox hinged on the fine detail of one of most contentious areas of tax; namely, the ‘off-payroll’ rules or IR35, as they’re more commonly referred to.
According to judges hearing the matter, an “imbalance of bargaining power” meant that all three were forced into working with the BBC through Personal Service Companies (PSCs). Although the journalists believed that they were self-employed, HMRC argued that they were employed – something which the tribunal concurred with.
The outcome marked another low point for the broadcaster, 18 months after former presenter Christa Ackroyd was landed with a tax bill of £420,000 following a similar dispute.
That case was something of a watershed, prompting searing criticism from the House of Commons’ Public Accounts Committee – which accused the BBC of “mishandling” its use of PSCs to such an extent that it “caused misery and hardship”.
Being excoriated by MPs followed separate analysis by the National Audit Office which disclosed how the BBC itself reckoned that the cases of some 800 presenters…
“nearly 300 of whom were hired through PSCs”, were being examined as they were “at risk of being challenged by HMRC”.
Perhaps unsurprisingly, Lord Hall revealed that he had apologised to many of those facing up to HMRC scrutiny. “I want”, he insisted, “to repair that relationship”.
Of course, all that stress and soul-searching didn’t rise up out of nowhere. In fact, as the NAO acknowledged, it originated in the BBC’s response to HMRC’s evolving response to the issue posed by PSCs.
The Revenue claimed that the failure by contractors to comply with the IR35 rules would cost the public purse about £440 million in 2016-17 alone with the amount set to increase still further if unchecked.
In April 2017, therefore, HMRC introduced new off-payroll rules for the public sector which saw those organisations using contractors becoming responsible for determining whether someone was actually truly freelance and employed by a variety of different businesses or effectively employed.
Having decided that the new process was working, the Revenue is extending it to the private sector from April 2020.
It’s understandable with such flux that there would be some confusion on the part of the BBC or other contracting bodies. After all, as the NAO again recognised in its November 2018 report, HMRC only unveiled a tool – Check Employment Status for Tax (CEST) – intended to help organisations assess the employment status of its contractors in February.
That left the BBC “less than two months to test, give feedback and adopt the tool prior to the introduction of its new responsibilities in April 2017”.
The CEST tool has also been extensively criticised.
Against the backdrop, it’s not only the status of contractors but the off-payoll rules themselves which are arguably questionable, something which I mentioned in a ‘blog late last year.
Two high-profile off-payroll outcomes in favour of HMRC have been equalised by two equally notable reverses, involving the experienced broadcaster Kaye Adams and the television presenter Lorraine Kelly.
The sense of uncertainty has also been reinforced by the fact that the latest judgement was a split decision decided by the tribunal chairman’s casting vote.
As with previous episodes in which the issue has erupted into the headlines, the case has also led to a fresh round of similar enquiries from contractors and businesses which myself and my colleagues at ETC Tax have been asked to consider.
Nevertheless, it’s possibly too much to expect HMRC to slam on the brakes and defer the intention to roll-out of the new IR35 rules to the private sector.
While the tax collection steamroller presses on, corporate reputations and contractor nerves will continue to be shredded in a fashion which even the most sincere retrospective apologies won’t be able to undo.
If you have any queries about this blog, or IR35 in general, then please do get in touch.
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