So new rules weren’t and aren’t needed then, eh?

More than 100 BBC presenters are facing tax bills that could run into hundreds of thousands of pounds after a former star lost her case against HMRC.

Christa Ackroyd earned more than the Prime Minister as co-host of the regional Look North programme on BBC One.

She was paid as a freelancer through a personal services company at the BBC’s request, but HMRC ruled that she should have paid the same level of tax as a BBC employee. Ms Ackroyd must now pay back £419,151.

If the current rules already catch such cases, what need for change?

And let us not forget something very important. Who is really going to face a tax bill? Well, the BBC as well, no?

For what service companies do is lower income tax a bit (the combination of corporation tax and dividend tax isn’t so different), employee national insurance disappears. But then so does employer national insurance, something with no cap at what, 13.8% of income? An amount the BBC is going to have to find, no?

This is the thing that really drove those personal service contracts and companies in the first place. BBC tax dodging.

Re a comment below:

She added that the £419,151 figure did not take into account corporation tax she had already paid through her personal service company. She is considering an appeal.

48 comments on “So new rules weren’t and aren’t needed then, eh?

  1. “Christa Ackroyd earned more than the Prime Minister as co-host of the regional Look North programme on BBC One.”

    To be fair, she’s probably more use to the country than the PM…

  2. But the current rules are HAAARD to enforce! Whine! Whine! We need to make it easier for HMRC, let’s give them the power to just take money out of people’s bank accounts whenever they feel like it. It’s not like they’d ever misuse such powers.

  3. Quick, quick, don’t look over there, here’s squirrel:

    “Senior NHS female doctors are earning less than their male counterparts, a BBC investigation shows.”

  4. Look North?? Stuart Hall’s old stamping ground?

    HTF do you justify paying anyone that amount of cash to talk shite for half an hour five days a week?

    Hell there hasn’t been a PM since Thatcher (and she was marginal) who has been worth what they were paid never mind some silly TV talking head.

    The last five PMs should have to spend the rest of their lives working 16 hour days to pay us back what their bungling and evil have cost us (the ERM collapse/the euro seen off/ Brexit being the exceptions).

  5. Tim, normal tax rules do apply to salary paid from a service company – both Employee’s and Employer’s NI is payable to HMRC.

  6. And let us not forget something very important. Who is really going to face a tax bill? Well, the BBC as well, no?

    The TV Licence payer, surely?

  7. HC

    But she will probably have taken the “dividend route” rather than salary to extract the funds from her company.

  8. But you don’t pay yourself a salary. Only a nominal one at least. You declare a profit and pay dividends.

  9. It seems surprising that it has taken so long. From the outset it appeared that these personal service arrangements fell foul of most of the tests used to distinguish contractors from employees

  10. A PSC actually increases tax a bit, since they stuck the extra 7.5% on dividends. But, as you say, NI disappears.

    Henry Crun: correct in theory, but in practice you don’t pay much of a salary out: you take £8k so as to get your NI stamp and a corporation tax deduction without actually paying any NI, and then the rest as dividends.

    The only times you pay significant salaries are if you think you’re going to be caught by IR35 (ie HMRC has already caught you), or if the end customer has insisted you use a PSC but you don’t want to look *too* aggressive so you take say £40k salary and the rest as dividends (which is a little inefficient, and still leaves you exposed to HMRC attacking you on IR35, but a surprising number of contractors feel more comfortable that way).

  11. > Who is really going to face a tax bill? Well, the BBC as well, no?

    No, in theory it’s Ackroyd’s personal services company which is liable. Since such companies tend to have very little money in them at any given time, IR35 lets HMRC go after the director personally. The BBC is completely off the hook. There’s plenty of case law in this area.

    Henry Crun,
    Presumably Ms Ackroyd was paying herself in dividends, thus avoiding National Insurance; as well as claiming all sorts of expenses that she wouldn’t be allowed if she were an employee of the BBC.

  12. Greenbank, AndrewM, you cannot exclusively be paid in dividends from a service company. There has to be an element of salary when withdrawing funds from the company.

    If Ms Ackroyd did as you suggest it’s no wonder HMRC came knocking.

  13. How is the BBC off the hook? If I take on worker as a ‘self employed contractor’ and HMRC decide that they are a PAYE employee, then I as employer am liable for all their back tax. Why does the BBC get off scot free? The lady was decided to be their employee, so why aren’t they liable for her tax?

  14. I’m not surprised at BBC tax dodging (or facilitating tax dodging by its staff); that’s been common for ages (didn’t Lorimer, of the original employee vs self-employed case, work in television?).

    But what astonishes me is how much she gets paid for presenting the local news bulletins.

  15. “Stuart Hall’s old stamping ground?”

    Are you saying you believe Hall is guilty, Ecksy? Unlike Savile and Harris?

  16. Jim said:
    “How is the BBC off the hook? If I take on worker as a ‘self employed contractor’ and HMRC decide that they are a PAYE employee, then I as employer am liable for all their back tax. Why does the BBC get off scot free?”

    Two similar but different things.

    – If the BBC (or whoever) contracts directly with Mrs Bloggs, claims she’s a self-employed contractor, but it turns out later she’s actually an employee, then the BBC is liable because it was the employer.

    – If the BBC (or whoever) contracts with Mrs Bloggs Ltd (of which Mrs Bloggs is shareholder and employee) for Mrs Bloggs’ services, the BBC can’t be the employer because its contract is with a company, not an individual, and a company can’t be an employee. Instead the “IR35” legislation says that if, in practice, the working relationship between Mrs Bloggs and the BBC looks more like an employee one, then any dividends Mrs Bloggs takes from Mrs Bloggs Ltd are taxed as if they had been a salary from Mrs Bloggs Ltd. But that’s tax that should have been paid by her and her company, not the BBC.

    Different set of rules because there’s no direct contract between the BBC and Mrs Bloggs..

  17. How do you get from “stamping ground” to your statement Theo? What with your mastery of logic and reason?

    Stuart Hall was known as a bumptious and difficult Prima Donna for decades prior to the accusations.

    I believe he may have pinched a few attractive women’s bums over the years because he considered himself God’s gift to the Universe never mind just women.

    Is he guilty of serious sexual assault? Acts that would be correctly labelled as sexual assault in a sane, non-Marxist world?

    No.

    The charges,” evidence” etc were of a similar quality to the usual bullshit. Hall was the first gone after–the fact of his ego doubtless having made him loads of enemies over the years–and he was ill-advised to plea-bargain when he should have toughed it out.

  18. HC

    you cannot exclusively be paid in dividends from a service company. There has to be an element of salary when withdrawing funds from the company

    Actually, that’s simply not true. The point being, define (in law, rather than HMRC’s guidance) a “personal service company”…

    A “contract” is either subject to the IR35 intermediaries legislation or it isn’t.

  19. Nothing from Ritchie on this. Surprising given that he plugged the use of personal service companies in the Observer! But then again the BBC pay him so he won’t criticise them.

  20. Christa Ackroyd earned more than the Prime Minister as co-host of the regional Look North programme on BBC One.

    Insane amount for a taxpayer funded organisation. Fucking snouts buried deep in the trough, and while lecturing the country about the joy of tax they are all at it avoiding it at all costs with dodgy arrangements like this.

    I don’t mi d the avoiding tax bit – it’s the fucking lecturing and moral tone while doing it which grates.

  21. HC

    As far as I am aware there is nothing in the Companies Act or Taxes Acts that requires a payment of a salary. If an engagement is caught by “IR35” then payments have to taxed by the PSC as though they were a salary (and the director might as well, in that case, extract the funds as a salary). However, Ms Ackroyd genuinely believed/blindly trusted her advisers/thought she could get away with pretending (take your pick) that she wasn’t caught. Clearly, HMRC, and now the judges, thought otherwise. In the meantime, as others have suggested, take a minimal salary to (ab)use the NIC rules and take the rest as dividends as needed.

    Full judgement here:

    http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10300

  22. What Richard T and PF said.

    Not what Tim and Henry Crun said.

    It’s even more complicated now by the ‘public sector’ element that’s been tacked on to IR35.

    If the PSC works solely for a public sector client, and the new rules apply (they’re not exactly the same as IR35), the PSC’s income will all have been taxed as the deemed income of the director and only the net-of-PAYE-and-NICs amount (and any VAT) will have been paid over. The PSC can then pay it over to the director without further tax or NIC, and it needn’t even go through payroll (as far as HMRC is concerned, it’s already been treated as the director’s income).

    The PAYE and NIC is not technically the liability of the BBC but it’s now the responsibility of the BBC to deduct it.

    It’s a shambles. Most public sector bodies seem to be running scared and applying the rules even if they probably need not.

  23. Mr Womby, Lineker’s company has at least 2 customers so he will probably get away with it. I suspect the Marrs and Paxos are well stuffed

  24. The problem here lies not with the BBC, but with the isomorphic nature of late-stage capitalism and the white power structure that neoliberalism seeks to promote and sustain.

    Time spent resisting isomorphism means less time available to ensure full tax compliance.

    The BBC should be given more money. Along with additional funds for employee screening.

  25. Andrew C – true, indeed, there are now new rules for public sector bodies, but this case was pre-2013 so pure IR35.

    I haven’t looked yet, but if the BBC would be responsible for deducting tax and NIC under the new public sector rules, presumably if they don’t then they will, in future, be liable for it?

    Apparently the BBC terminated the contract because of the tax challenge. Seems a bit extreme, especially since they insisted on using the company structure. I wonder if there’s a claim for breach of contract there?

  26. Will the tax paid now be a loss for the company, having overpaid corporation tax because of failure to apply salary and NI as a cost? It seems quite a stretch to think 491k pounds is the tax that would have been paid if done under normal PAYE terms.

  27. “The last five PMs should have to spend the rest of their lives working 16 hour days to pay us back”: that would be a bit difficult for Toni Blair if his head is on a spike.

  28. “Lineker’s company has at least 2 customers so he will probably get away with it.” That seems a fair test for a company that traded for, let us say, five years. Wold it be a reasonable test for a new company, though, one that traded for only one or two years?

  29. Rhoda, I presume that HMRC are applying the usual penalties – probably between 0 and 30% of the tax owed – and interest at 3 %. They boost the amount payable quite significantly

  30. Henry Crun – as an employee of the BBC the relevant tax and NI would be paid on the wage of whatever amount.
    As she is using a service company the company bills the BBC who pay ZERO taxes on the payment.
    She then arranges herself to get a wage from the service company. At whatever level she wants, typically at the level of an allowance so as to reduce tax & NI.
    Paying corporation tax on the company profit.

    Now she is being classed as though she was an employee of the BBC and presumably both BBC and her have to now pay some money.

  31. DtP

    In fariness to the BBC (I’m not a customer), it’s not the BBC who are taking the salary / divdend decisions within any company that they contract with (whatever we think the prior expectation wrt might have been).

    There is nothing to stop the Board of the supplier company looking at the facts (taking professional advice) and deciding to charge a full salary through (rather than divs say?). It is entirely the responsibility of the directors / Board.

    I’m not trying to defend the buggers, simply questioning the literal statement “the BBC practises tax avoidance”.

  32. PF – so the BBC now have to treat her as an employee but not have to pay some money for NI?
    I’m talking about now – not past.

  33. PF I think that encouraging/coercing people to work as contractors when there has been a well-publicised drive by HMRC over a number of years to reclassify “contractors” as the employees they really are comes well within the ambit of duplicitous tax dodging. Who else would use these people as suppliers is the question that springs to mind in the cases of Paxman, Marr, etc.? Other broadcasters, perhaps, but how many people work for rival broadcasters?

  34. Also all that stuff recently about how much certain people get paid and that gender pay gap stuff does tend to suggest that they are workers rather than suppliers

  35. Martin

    I’m talking about now – not past.

    Sorry, I misunderstood you.

    Diogenes

    to reclassify “contractors” as the employees they really are

    But that’s the point isn’t it. Where they very clearly are that, I agree with you.

    But, in many cases, the customer (and the contractor / supplier / whatever) want it to be a B2B relationship? There are masses of micro companies (including one director companies) that are no where near anything resembling IR35.

    Re Paxman, Marr and co, I would tend to argue that they are offered a contract specifically to deliver a project (in this case “a successful show”). I don’t care how many repeat gigs they got because they successfully delivered.

    I get that the traditional employment tests might not easily suit particular sectors, including with this, but certainly a lot of the time elsewhere it is simply a project (or outcome) delivered that is actually what the customer is really looking for. The same as for an audit, tax report, office cleaned every day, whatever.

    If neither the customer nor the supplier / contractor want to be faffed with “the contractor joining the customer and becoming part of the furniture” / with commitments and obligations on both sides and all that crap, then the relationship can quite easily resemble a willing B2B one.

    gender pay gap

    Excellent point! When the muppets start using arguments like this, they deserve what they get!

  36. “How do you get from “stamping ground” to your statement Theo? What with your mastery of logic and reason?”

    A question is not a statement, Ecksy. I assumed your limited education enabled you to grasp the difference.

    Thank you for your clarification: Stuart Hall is not guilty, in your opinion. So why did you even mention him above? As in:

    “Look North?? Stuart Hall’s old stamping ground?”

  37. Mr Womby, Lineker’s company has at least 2 customers so he will probably get away with it. I suspect the Marrs and Paxos are well stuffed

    Paxo does UC for Granada, can’t speak for Marr, but he probably has non-Beeb work as well.

  38. The gender pay gap stuff might sway a tribunal to thinking of their activities as a job rather than a project for which special attributes are required, such as fame, societal respect etc, otherwise anyone could front the show. It didn’t work when they tried to do Top Gear without the “team”, so maybe we should accept that intangible assets exist, even if we are unable to work out how to value them. But for most TV shows? Ant and Dec? I would just pay them scale rates and see what happens. If Ant ever works again, then I lose my pension

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