The trio all present national and international BBC news programmes and were each required by the BBC to create a company through which their salaries were paid over the period between 2003 and 2014. It provides another valuable warning of the need to take extreme care when using such service companies to receive payments from organisations and companies you work for.
What is IR35 legislation?
Broadly speaking, IR35 legislation is designed to tackle tax avoidance by workers using a limited company and paying lower corporate tax rates, rather than the higher income tax and national insurance liabilities as an employee. In line with other news presenters, for many years the BBC obliged the trio to use this company structure and accept reductions in pay. This was in common with a number of other organisations who have forced certain workers into these types of arrangements, partly in order to avoid giving them employment rights, to save on their employer’s National Insurance bill and enable them to avoid adding to the official employee headcount at a time of cost-cutting. Although the individuals themselves may have preferred the employment route, they are the ones taking the “risk” with regards to the IR35 legislation in the eyes of HMRC.
Lesser-known presenters in the firing line?
The latest ruling has echoes of the Christa Ackroyd case in February 2018, where the “Look North” regional news presenter was found to have breached IR35 legislation and was required to pay additional tax, despite being effectively forced to use the company structure by the BBC. Like the other three, Ms Ackroyd had a number of factors that pointed towards an employment relationship with the BBC, such as a long-term contract, clothing allowance and a large amount of control by the BBC over their day to day work, and freedom to work with others.
However, since the Ackroyd case, HMRC had lost a number of IR35 cases, such as those involving Lorraine Kelly, Kay Adams and Paul Hawksbee, presenters at other media outlets. While their working relationship shared some of the characteristics of an employment relationship, the nature of their roles blurred the lines of control and mutuality of obligations. In particular, Lorraine Kelly was viewed more as an entertainer and a “product” to be purchased by ITV, rather than a less well-known news presenter without their own “brand.”
Be aware of the changing landscape, as an employee, and as a business owner
These cases serve as another important reminder that the distinction between an employment relationship and that of a self-employed contractor or service company is a very complicated area, no better illustrated than through the split decision by the judges at the recent First Tier Tribunal case. It is, however, not a choice that the contractor or the company under which they will provide services can make themselves, but instead is down to the characteristics of the relationship which the individual has with the engaging organisation. These characteristics are being increasingly tested in tribunals and courts, as HMRC become more and more aggressive in their pursuit of cases where they feel the wrong decision has been made. Recent changes putting the financial risk on the company receiving the services in the public sector and, from April 2020, in the private sector too, will only serve to complicate matters further. Using a service company for services you provide should not therefore be undertaken lightly, nor should it be treated as a choice you can make, and professional advice should also be sought before doing so.