HMRC has won an IR35 tribunal case at the High Court against three BBC presenters who will now have to pay back tens of thousands in taxes.
David Eaves, Tim Wilcox and Joanna Gosling had all been deemed to fall under IR35 during a series of contracts with the broadcaster. HMRC had pursued the trio for £920,000 in unpaid taxes.
IR35
IR35: Will the private sector learn the hard way?
Off-payroll working: How IR35 rules affect the private sector
The High Court ruled that they had effectively been forced into contracting through personal service companies by the BBC, arguing that there was an “imbalance of bargaining power”.
The judges said: “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 presenters argued that they were self-employed but the court ruled that because they were told how, where and when to work, that the “assumed relationships were ones of employment”.
The outcome of the case was a split decision resolved on a casting vote, and could now have implications for more than 100 other presenters who work for personal service companies and may now have to pay back years of taxes owed.
CEO of contractor legislation experts Qdos, Seb Maley, argued that it should be up to the BBC to settle, not the presenters.
He said: “It’s of real concern that at present, these individuals look like they will be made to pay vast sums to HMRC, despite the judges finding they were ‘forced’ into working as self-employed by The BBC. The onus should be on the engager to settle, not the presenters, who it’s very difficult to label as guilty.”
“With around 100 other BBC presenters in the same boat, we could see similar verdicts in time. However, each case needs to be examined on its own merit. And if it’s decided the BBC left someone with no choice but to work outside IR35, then these individuals must be helped financially.”
The BBC has acknowledged responsibility for the contracts and has said it will help to resolve the cases. Around £200,000 of the bill is employers’ national insurance, which the BBC will have to settle.
A statement from the presenters said: “The tribunal has found as a fact that we were forced into setting up personal service companies by the BBC. Furthermore, it found that the BBC knew that, in doing so, a tax risk and liability were passed onto us which they would otherwise have been responsible for – yet we were not made aware of these concerns.
“We have endured eight years of HMRC investigation and eventual determinations to reach this point on what is clearly a difficult and unclear subject even for judges. It has been a depressing and stressful period for each of us.”
It’s vital that HMRC now provides the greater clarity which is still needed to avoid others having to go through this ordeal.” – BBC spokesperson
A BBC spokesperson said: “We want to help presenters resolve any historic tax issues they face because of the way their employment status is now being assessed. We are reviewing the judgment and will work with each of the presenters to agree how we will help them.”
The broadcaster said it acknowledged its longstanding policy of engaging presenters through personal service companies where they were understood to be self-employed, and that it would support individuals but that HMRC needed to provide greater clarity on the rules.
It added: “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.
“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.
“We have tried for a long time to agree a set of guidance with HMRC which gives certainty for the media industry. It’s vital that HMRC now provides the greater clarity which is still needed to avoid others having to go through this ordeal.”
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) said the fact the case had taken eight years, only to be resolved on a split decision, showed how opaque the rules were around contractor status.
He said: “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.
“These BBC cases are high profile but not typical of IR35 issues. Most involve freelancers and contractors working on innovation and productivity projects. Burdening business with the complexity of IR35 only damages the UK economy and the overall tax take. Instead the Treasury should focus on reforming our telegram-era tax code to be fit for the broadband age.”
HMRC published draft legislation in July that, from April next year, places the onus on private sector firms to check whether contractors need to pay tax and national insurance contributions, shifting responsibility from the contractor to the employer using their services.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
These rules have been in place for public sector organisations contracting workers supplied through their own personal service companies (PSCs) since 2017.
Compensation and benefits opportunities on Personnel Today
Browse more compensation and benefits jobs
6 comments
Just pay your taxes like most decent people do..!!!
As an Engineering Consultant working via my own LTD company, I understand the rules of IR35 very well.
I take exception to the idea that we don’t pay the correct amount of tax.
Ask my accountant.
I fund travel to clients site weekly some 100 miles away, my own holidays and sick pay and professional indemnity insurance, and at the end of the contract, I don’t go and sign on whilst I try to obtain the next contract. I use the money that I earnt in the previous one
And the client can let you go just like that.
Well said sir and so true of us contractors who use their specialist skills to assist businesses with complex project while taking risks themselves with their way of working. If not self employed then add all the employment benefits or these businesses will suffer from much higher wages or lose the skills
Absolutely agree. The true exposure to financial risk that professional contractors are faced with is barely understood by those outside the profession. People need educating.
Darren, your comment is outrageous. Contractors pay plenty of tax under the current system. I am also an Engineering Consultant and have significant overheads to travel for work, often hundreds of miles every week. Companies rely on people like us to deliver projects and make profit. Oh and those companies then pay more tax into the system!
Additionally, everything we spend is also helping business’s that…..pay tax into the system. Your opinion is rude and insulting to the many highly motivated and decent contractors bouncing from company to company propping up the economy
You have no right to judge people who you don’t know from your PAYE ivory tower. Although sadly it does demonstrate how a massive lack of general understanding has led to this witch hunt.
That’s fine, but pay holiday pay, sick pay, pension contributions and all the other benefits you probably get as a permanent employee
Comments are closed.