Tax Hit On BBC Presenter – Consequences For Interim / Contingent Workforce

A high-profile legal case last week that ended in bad news for Look North presenter Christa Ackroyd and good news for Her Majesty’s Revenue and Customs (HMRC) has surprisingly important implications for many people and organisations. And it should be noted by procurement people, particularly category managers in the HR / contingent labour areas.

As The Guardian reported, “a number of BBC presenters could be facing bills for thousands of pounds in backdated tax after HMRC won a key tribunal ruling against Christa Ackroyd, the former presenter of the corporation’s regional Look North programme”.

She now faces a tax bill for £420,000 after the tax tribunal at the Royal Courts of Justice decided that she was in reality an employee of the BBC and should have been on the corporation’s payroll rather than working through a personal services company. She was fired by the BBC in 2013, apparently over a “breach of contract” connected with HMRC demanding the unpaid taxes.

You have to feel sorry for her (to some extent at least). As the BBC itself reported, the tribunal said that it did not criticise her for not realising how the legislation worked. She “ took professional advice in relation to the contractual arrangements with the BBC and she was encouraged by the BBC to contract through a personal service company."

Indeed, one aspect of this whole case is the BBC’s behaviour and position. If the organisation in any sense encouraged Ackroyd to work in this manner, there might still be a claim by her against the organisation, and we don’t know whether HMRC has gone after the BBC also for their share of the unpaid taxes. If she is responsible for unpaid National insurance on her side, surely the same must apply to the BBC with employer’s NI, for instance?

But the most important element to emerge from this is over the definition of employment versus self-employment. There were aspects here that contributed to the decision; for instance, in 2009, 98% of the £206K earned by Ackroyd came from the BBC. She was contracted to work for 225 days a year for Look North and if she didn’t her fees would reduce.

Perhaps most importantly, she was given a £3,000 annual clothing allowance by the BBC, and her contract restricted her from working for other organisations without BBC permission. Those are exactly the sort of indicators that tend to suggest this was in fact an “employment” relationship.

This is actually the first time in seven years HMRC has won one of these “IR35” cases as they tend to be known, IR35 being the key legislation.  HMRC is apparently investigating lots of other broadcasters, and this also may have implications for others – IT contractors have been a target previously for investigation, and long-term senior “interims” might also be vulnerable.

So for procurement folk, it is worth checking whether you have the right policies in place. If you regularly employ interims to do a job that in effect has a box on the organisation chart, the individuals sits in your office, using your equipment, under the supervision of your people, and they don’t have other clients on the go at the same time … then if the HMRC looked at it, they might well decide this is an employment relationship.

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  1. Charlie Middleton:

    IR35 legislation is complex but the BBC presenter in this case did virtually everything she could have to put herself in scope for being investigated as a disguised employee. She signed a contract committing here to work for 225 days a year. She only had one client. She was required to turn up at the same time every day to present. She couldn’t work from home. She had to read the autocue and follow the BBC manual of procedures for presenters on what they can and cannot say and do. She couldn’t send a substitute to present the programme. And that is the only IR35 case HMRC has won in seven years. It was pretty much an open goal for them!

    Other than in the public sector, this isn’t really an issue for procurement departments. All of the risk of IR35 is on the contractor who has to decide whether they treat their contract inside or outside the legislation. Sensible ones will do all they can to negotiate a strong contract for IR35. But if a contractor outside the public sector is investigated and loses a Tribunal, they pay all of the fines. There are no taxes for the client to pay – they pass all the liability to the contractor’s company.

    It is different in the public sector where the new rules make the fee payer liable, which is either the public body or a recruitment agency if they supply the worker. And things might change in 2019 or 2020 if the public sector rules are rolled out to the private sector. But for now in the private sector it is vey much business as usual.

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