BBC still to resolve tax issues for freelancers

The BBC has unresolved issues relating to the tax status of dozens of its on-air presenters and others hired through personal service companies (PSCs) which may have future financial implications for the broadcaster, a National Audit Office (NAO) inquiry has found

The audit watchdog’s review of how the BBC paid its freelancers found that in 2017-18 the BBC had contracts with 5,145 PSCs, on which it spent a total of £84m.

In April 2017, when responsibility for determining employment status for tax purposes of people hired through PSCs passed to the public bodies hiring them, the BBC started to use HMRC’s check employment status tool (CEST), which in many cases produced a different employment status for tax purposes for individuals who had previously been treated as self-employed.

By June 2018 the BBC had assessed 663 on-air freelancers using HMRC’s tool and 92% received an ‘employed for tax purposes determination’, whereas before the BBC had assessed the majority as self-employed.

Between April and September 2017 the BBC paid £8.3m of tax on account to HMRC to avoid any penalty charges for not paying tax that was potentially due. It started to recoup this money when it was certain about an individual’s employment status for tax purposes, but has not yet fully done so, in part because of concerns raised by individuals. By June 2018, it was yet to recoup £2.9m.

The NAO report points out that the BBC’s implementation of these changes has adversely affected its relationship with some of its freelancers, with 170 presenters publicly expressing concerns through an open letter, amid claims that the BBC bears some responsibility because it required people to operate PSCs if they were to receive work.

In response the BBC has taken a number of steps to help, including paying bridging loans to three people, totalling £2,550, to enable them to overcome short-term cash-flow problems. It has also given a £12,000 contribution towards additional book-keeping fees arising from the IR35 compliance changes to 33 people with PSCs.

However, the NAO report warns issues relating to the BBC’s relationship with its freelancers remain unresolved and may have financial implications for the BBC.

By May 2018, the BBC estimated that some 800 presenters, nearly 300 of whom were hired through PSCs, warranted further review as they were at risk of being challenged by HMRC. This could involve tax arrears for the BBC and for the PSCs. According to HMRC, as at October 2018, there were about 100 open investigations into BBC-related PSCs. All of these concerned arrears of tax before the April 2017 changes. All open cases relate to tax years prior to 2017 and the vast majority of these were opened prior to the reform.

Meg Hillier, chair of the public accounts committee (PAC) which has held its own inquiry into the issues around PSCs said: ‘The PAC raised concerns about the BBC’s use of PSCs six years ago. It is worrying that, six years on, the mess of clarifying the employment status for tax purposes of people the BBC hires through PSCs has not been fully untangled.’

An HMRC spokesman said: ‘Presenters are now increasingly paying the right tax and most do.

‘Where presenters have not paid the right amount of tax it is right that we enforce the law so people are treated equally and fairly.’

Investigation into the BBC’s engagement with personal service companies is here

Report by Pat Sweet

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