BBC presenters lose in IR35 ‘chaos’

HMRC has won a First Tier Tribunal (FTT) case concerning the employment status of three BBC presenters who used personal service companies (PSCs), in an IR35 ruling involving over £300,000 in tax which threatens to add to the ‘chaos’ around how the employment rules should be applied

The tribunal concerned the working arrangements for presenters David Eades, Tim Willcox and Joanna Gosling, who worked on the BBC News and World channels.

It heard evidence that each was required to operate a PSC to receive their payments from 2003 and 2004 until 2014. HMRC had issued the three with tax demands amounting to £920,000, of which around £600,000 has been paid. The tax authority was seeking £300,000, which was understood to consist largely of employers' national insurance payments.

Unusually, the two judges at the tribunal disagreed about the IR35 status of the presenters, although they were unanimous that the ‘imbalance of bargaining power’ between the presenters and BBC was a significant factor in the case.

The tribunal stated: ‘The BBC were in a unique position and used it to force the presenters into contracting through personal service companies and to accept reductions in pay.’

The outcome was decided on the casting vote of Judge Harriet Morgan, who concluded that there was ‘sufficient mutuality and at least a sufficient framework of control to place the assumed relationships between the BBC and the presenters in the employment field’.

In a statement released after the decisions the presenters said: ‘We are both pleased and relieved to say that the tribunal has also found that we acted in good faith, dismissing HMRC’s claim that we - or our accountants - were careless about our tax affairs in any way. ‘As a result, the tribunal ruled that HMRC could not pursue its tax demands for a number of the years in question.

‘We are delighted that our accountants were also deemed to have acted in good faith throughout. Given some of these findings, we are considering with our legal advisers whether to appeal.’

For its part, the BBC said it wanted to help presenters resolve any ‘historic tax issues they face because of the way their employment status is now being assessed’.

The BBC stated: ‘We have acknowledged that many years ago the BBC introduced a policy of engaging certain freelance presenters through PSCs where they were understood to be self-employed.

‘We have also said that where people now face a challenge as a result of this we want to put this right as quickly and effectively as possible.

‘We understand and regret the stress this has put people under, and have set out the principles of how we will help presenters in a way that is fair to the individuals involved, to HMRC and to licence fee payers.’

An HMRC spokesman said: ’HMRC welcomes the judgement that the presenters are within the intermediary rules; this builds on previous related FTT decisions.

‘Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid we put things right.

 ‘It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and national insurance contributions as employees.’

However this decision runs counter to other recent IR35 rulings involving payment arrangements for TV and radio personalities, as another FTT decided earlier this year that Lorraine Kelly was not liable to pay a £1.2m tax  claim arising from her work via a PSC for ITV.

The BBC said: ‘Recent hearings involving presenters from across the media industry have produced a range of outcomes and this split judgment further demonstrates the confusion of the tax system for those working in broadcasting.’

Around 100 other BBC presenters are thought to have provided their services via a PSC, suggesting that there could be further tribunal hearings in the pipeline.

Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) said: ‘That this case has taken eight years and ended up with an uncertain split decision shows how confusing and unfit for purpose IR35 is.

‘We will look at the judgement in detail but the uncertainty in the decision is likely to add to the chaos around this legislation. Recently, HMRC has lost the majority of these cases. There is little evidence that they or other experienced tax specialists are confident in how it works.

‘We remain at a loss how the Treasury expects medium-sized businesses to accurately apply IR35 to their contractors from next year when HMRC and tax judges struggle.’

By Pat Sweet

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