An IR35 Tribunal has found that three BBC presenters wrongly worked outside IR35 while engaged by the broadcaster, who the judges said ‘forced’ these individuals into operating through personal service companies.
The Tribunal considered a number of BBC contracts held by presenters, Joanna Gosling, David Eades and Tim Willcox, with HMRC reportedly chasing £920,000 in unpaid tax. After an eight-year investigation, the split-verdict, which had to be resolved via a casting vote, decided the contracts were reflective of inside IR35 engagements.
However, given The BBC’s “unique position”, which the broadcaster used “to force the presenters into contracting through personal service companies and to accept reductions in pay,” the Tribunal said the individuals had not deliberately abused the rules.
Therefore, the court found they could not be held accountable for the full amount. A reported figure between £200,000 and £300,000 was settled on and The BBC has since said it wants to “help” the presenters impacted.
Given around 100 other BBC presenters are currently subject to an IR35 enquiry, we’ve explored what this ruling could mean for the journalists engaged by the broadcaster, UK contractors in general and what agencies and clients can take from the verdict as we approach IR35 reform.
This case highlights the confusing nature of the IR35 rules once again. After all, it took eight years only for the judges to disagree with one another. It’s no secret that HMRC is under pressure to simplify the legislation, but there has yet to be any real progress made in this area. Therefore, with IR35 changes approaching, private sector firms must make sure they possess the skills and expertise to make well-informed IR35 decisions.
The presenters had no choice but to endure “an exhaustive battle lasting eight years.” Given the emotional and financial burden this will have placed on each individual, it’s clear HMRC has to do more to resolve cases faster.
The sheer length of this case also raises questions about HMRC’s ability to quickly conclude the situation of the 1,500 contractors it recently wrote to who were engaged by GlaxoSmithKline in 2018/19.
It was said that The BBC “forced” these presenters to operate through personal service companies, but even so, the broadcaster is not legally obliged to help these contractors settle their tax bills.
The BBC has explained it wants to “put this right as quickly and effectively as possible”, but financial help - albeit welcomed - does not make up for the fact this is an ordeal that these contractors shouldn’t have had to experience.
Plenty of IR35 experts are asking whether this is a sign of things to come. Will the 100 or so other BBC presenters in a similar situation also be found guilty, but given reduced bills because they were told they must work as contractors? Potentially. That said, it’s vital each case is investigated individually and on its own merit. If it’s decided - like in this situation - that The BBC was guilty of wrongdoing, then it’s important the individuals are helped financially by the broadcaster.
UK contractors should be wary of HMRC’s aggressive approach to IR35 compliance, but must also bear in mind that The BBC scenario is an unusual one. It’s rare that individuals are left with no choice but to work through personal service companies, albeit not unheard of. When focusing on the BBC case, genuine contractors who have set or had their IR35 status set with care shouldn’t panic.
There are lessons to learn. With little more than six months until private sector firms become responsible for determining the tax status of contractors (with fee-payers set to carry the IR35 liability) it’s paramount that situations like this are avoided in future. Companies that prioritise savings and simplicity over compliance, therefore forcing individuals into non-compliant working arrangements, risk deterring contractors and huge fines.
With over 25 years’ experience, Qdos is a specialist contractor tax, IR35 and insurance adviser and we review on average, over 1000 contracts every month. Since 2000 and the introduction of the IR35 legislation, we have handled more than 1,600 IR35 enquiries, saving UK contractors over £35million in tax.
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