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BBC presenters lose IR35 tax tribunal

BBC presenters lose IR35 tax tribunal

In the latest IR35 tribunal concerning the entertainment industry, the High Court has upheld HMRC’s claim against three BBC news presenters, ordering them to pay back around £300,000 in accumulative bills.

Presenters David Eaves, Tim Wilcox and Joanna Gosling were all deemed within the scope of IR35 during a series of contracts with the BBC. In summary, Judge Harriet Morgan concluded that there was: “Sufficient mutuality and at least a sufficient framework of control to place the assumed relationships between the BBC and the presenters in the employment field.”

The verdict follows a mass clampdown on the entertainment industry by HMRC. In 2016 more than 100 BBC presenters working through their own limited companies were sent subsequent tax bills. As the first of these cases to use the tribunal system, the verdict will come as a blow to other BBC presenters who saw this as a test case.

In ruling that the relationship between the presenters and the BBC was one of employment, the court’s discussion of mutuality of obligation (MOO) and right of control was extensive. The presenters’ defense argued that they were subject to “an elegant form of zero-hours contracts”, while also claiming that BBC editorial guidelines did not amount to control.

Although the court found that there was evidence to suggest that MOO and control did exist, the case highlighted the extreme complexity involved in applying the off-payroll legislation. Two of the tribunal judges took opposing views over the IR35 status of the presenters, with the case resting on the casting vote of Judge Morgan.

The Judges’ inability to reach a unanimous verdict was perhaps taken into account in ruling that HMRC could not pursue tax demands for a number of the years in question. In order to extend its investigations to six years, HMRC needed proof of carelessness by either the appellant or their advisor. However, the court found that the presenters and their accountants had acted in good faith, after being left with little option by the BBC to work through a personal service company (PSC).

As with the Christa Ackroyd IR35 ruling in February, which she also lost, it was revealed that the presenters had entered into a limited company arrangement upon the BBC’s insistence. The judges found that the “imbalance of bargaining power” at the BBC was a significant factor in the case.

The tribunal acknowledged that in forcing presenters to work through PSCs, the BBC knew that they were passing on a tax risk and liability. Not only were the presenters not made aware of these concerns, around £200,000 of the tax owed is employers’ National Insurance, which the BBC would have been liable for if the presenters had been employed.

The BBC has acknowledged some responsibility, stating: “Many years ago the BBC introduced a policy of engaging certain freelance presenters through PSCs where they were understood to be self-employed. We have also said that where people now face a challenge as a result of this we want to put this right as quickly and effectively as possible.”

While stating their intention to help, the BBC also made the point that there is insufficient guidance for employers when it comes to IR35. A BBC spokesperson said: “Recent hearings involving presenters from across the media industry have produced a range of outcomes and this split judgment further demonstrates the confusion of the tax system for those working in broadcasting. It’s vital that HMRC now provides the greater clarity which is still needed to avoid others having to go through this ordeal.”

Julia Kermode, CEO of The Freelancer & Contractor Services Association (FCSA), echoed these concerns over the judges’ opposing views, stating that this only illustrates how unfair it is to expect businesses to make IR35 determinations in the light of off-payroll legislation due in 2020.

Gosling, Eades and Willcox said they were disappointed by the result of the case, which they described as “an exhaustive battle lasting eight years”. Given some of the mitigating circumstances, they are currently consulting with their legal advisors on whether to appeal. This decision may be influenced by the Ackroyd case, which is currently awaiting an appeal verdict.

A legal representative said that the presenters’ positions weren’t helped by their contracts, which could have been drafted to clearly reflect their real intentions of being self-employed. In may cases, contractors and their clients can reduce the IR35 risk by paying attention to detail. Industry spokespeople argue that in the majority of cases PSCs aren’t a mechanism to avoid tax, but a legitimate way of being in business on your own account that separates business and personal liabilities.

Concern that contractors have faced unfair persecution by HMRC over taxes was also raised by news that the controversial loan charge is to receive an independent review – read our article here.

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