An interesting little tale about how the conversation changes upon a subject in the media. We’ll not claim all of the credit here, but at least as far as we know we’re the only people who have made this point in a major print publication. And once it has been made it has very quickly become an accepted fact, one that is simply stated, not argued over.
The BBC presenters row, much of the shouting has been about how they have been avoiding income tax by using those personal services companies. This isn’t quite the case, as the combination of corporation tax and that upon dividends is, by design, really very close to the amount that would be paid in straight income tax as an employee. That’s not, therefore, where the tax benefit lies at all. Instead, the tax which does get dodged is employers’ national insurance. We pointed this out in The Times under two weeks ago and, as we say, we’re reasonably sure this was the first major newspaper revelation of this point:
The combination of those two tax rates, upon company and dividend, is by design close to the rate which would have been paid on simple wage income. It isn’t, by and large, income tax that’s being legally avoided by such a scheme.
It’s also not employees’ NI. These schemes work best for those with significant incomes and the employees’ rate drops to only 2 per cent on earnings over about £42,000: not a figure that generates corporate structures to avoid it. However, employers’ NI is charged at 13.8 per cent on all wages. That is a significant sum when an individual’s income is £160,000 a year and more.
We had several private communications as a result of that piece from presenters complaining about how the BBC had treated them.
Shuffle on that not quite two weeks and we get the Telegraph telling us:
The BBC is facing a revolt by presenters being pursued by HMRC over what the stars allege was the corporation’s “industrial-level tax avoidance”.
There is growing anger that the BBC continues to deny that presenters were pressured to set up personal service companies, despite a recent tax tribunal ruling that to be the case.
The mechanism allowed the BBC to save millions by not having to pay National Insurance contributions.
Instead of anyone having to explain the point it is now just accepted fact that it is the NI which was dodged, the BBC which benefited from it having been so. Economists will argue about the incidence of employers’ NI, as we would ourselves in different circumstances. But in political terms the argument has most certainly changed, has it not?
The mechanism meant the BBC was able to save millions of pounds by not having to pay National Insurance contributions.
Now, HMRC is demanding tax off some of the presenters – with some being asked to pay hundreds of thousands of pounds – and believe the BBC should foot the bill.
Even the Mail has caught up.
As to the legal position here, no, once we’re dealing with an incorporated company then the BBC has no duty for tax unpaid at all. Any system of limited liability just cannot work if it does and whatever we think of tax dodging we’re not going to kill off the third great human invention after agriculture and the scientific method, that limited liability company. The BBC just doesn’t have to pay at all.
Although we’re talking media politics here, not economics nor the law, so the betting is the BBC will fold at some point.
The language we use matters - it provides clarity to our own thoughts and enables…
It is now generally acknowledged that the structure of the NHS needs to be overhauled…
In the film Apollo 13, a loss of oxygen causes the crew to start inadvertently…
There's an idea out there which seems intuitive but then so many ideas do seem…
When we think about the darkly opaque goals of modern central bankers as they relate…
As the papers recently filled with the distressing images of desperate souls looking to escape…
View Comments
If you're going to ponce about using the editorial 'we', you need to edit out the collective 'we' as in: 'As to the legal position here, no, once we’re dealing with an incorporated company then the BBC has no duty for tax unpaid at all.' (Unless you are having dealings with the BBC about employers' NIC, of course.)
The we will disappear soon enough, when I'm not writing all the pieces.....
To Hell with both the cultural marxist propaganda outfit that is the BBC and likewise to the same destination with the cultural marxist stooges who masquerade as "presenters" but are in fact the direct disseminators of the BBC's output of CM garbage.
I couldn't care less about the "tax dodging" bollocks. Keeping cash out of the state's thieving hand is a very good thing. Keep enough cash away from them they won't be able to run their police state. And people might be able to afford decent health care instead of the death assistance program known as the NHS. The BBC merely shows the hypocrisy of the womiccumalobus crew--tax for thee but not for middle-class marxist me.
Unbelievably, a few years ago - long after the introduction of IR35- HMRC was, itself, demanding that software developers and programmers form limited companies.
There's the State for you.
I think we are missing the main point. Regardless of who is blamed by the media, the BBC won't fight this for long. Because it is not their money.
It is my money. And they are perfectly happy to p!ss it away in a variety of idiotic ways.
"It is my money."
Don't pay them. None of us is obliged to be a customer.
Never mind the legal position - does "presenters claiming that the BBC is responsible" even pass the smell test?
Each case will be different but, if there is any Ers NI or other additional tax to be paid, is that because those contractors took bad advice from their lawyers or accountants at the start, when setting up those companies and when the contracts (and expected working conditions) between those companies and the BBC were reviewed?
If the risk of the contract being subject to IR35 was high, there was nothing whatsoever to stop that contractor (on taking advice) either having the income treated as if it was subject to IR35 or taking other steps to mitigate?
Hence, if any BBC contractor is now claiming that the BBC misled them, thenperhaps they are either being dishonest or didn't bother to get any competent advice at the time (despite going through the process of setting up a company, appointing an accountant, etc)?
I don't understand - HMRC is perfectly able to declare that legal agreements are null and void because they are entirely aimed at creating an artificial process purely to avoid tax. So how is the BBC's contract with a personal service company exactly not part of an artificial process designed purely to make what the reality is (a person coming to work at the same office doing the same job for a single employer) into a fiction (that the lady in question was somehow 'in business' as a TV presenter)? The BBC know full well the company they are contracting with is not trading in any sense of the word, and they are benefiting from losing the employers NI contributions, so how come HMRC are letting them off the hook?
"and they are benefiting from losing the employers NI contributions"
Jim,
That's the bit that's not right.
It is for the (contractor's) company to decide how to remunerate its directors (employees). If the company's contract with the BBC was likely to be subject to IR35, all the company had to do was comply.
It would have had the financial effect (very roughly, or worse) of paying the director as if they were an employee of the BBC. Job done. No tax evasion. The contractor's company got it wrong (not the BBC), for whatever reason. Thought they would get away with it, didn't take advice, got poor advice, whatever?
btw, if NI is 13%, we don't know that the BBC didn't pay 113%. Bear in mind that contractors are often quite a bit more expensive, because responsibilities (holiday etc) all get passed onto the company?
Re the contract, it's a willing contract between two parties? I can'r see any sham with regard to the two parties if it was entered into willingly. The tax / NI possibilities are separate, as above
"Thought they would get away with it, didn’t take advice, got poor advice, whatever?"
Or - with advice - genuinely thought they were not subject to IR35.
I persoally fail to see how the Ackroyd contract / circumstances didn't flash up alarm bells, for the reasons people made over at Tim's place, but the law continues to be tested in the courts and HMRC haven't by any measure had this all their own way. And, for all the current noise, it might well be that other contracts with the BBC are quite reasonably outside?
Further to all this, if I as a business owner demand that any contractor working for me does so through a PSC does that mean I'm immune from any comeback from HMRC over employment/self employment issues?
That is often precisely why it is done. And which is fine if that's what both parties want?
FWIW, many many contractors / freelancers / small businesses don't want to be "employees" of their "clients", with all the regulatory crap that comes with that, and prefer the freedom of being separate / treating the customer / client as a B2B relationship.
Some of those "B2B" contracts, on closer inspection, can fall close to being subject to IR35. A hugely grey area. But it's for the supplier to make that call, if there is any potential risk, not the client (barring recent changes in the public sector etc).
Problem is, if the BBC folds, where does that leave ITV, C4, C5, Sky, and all the rest? It’s all very well finding an extra 13% of your wage bill for the last decade if the government (C4) or licence fee payer (BBC) is footing the bill; rather harder if you’re a commercial organisation.
Andrew M I do believe you have hit the nail on the head. If HMRC now goes after "all the rest" they will go belly-up and BBC will be left as sole survivor. That is if the Beeb is Machiavellian enough to have hatched this plan from the start.