Hundreds of BBC presenters and staff were ‘coerced’ into forming personal service companies to gain work at the corporation so that it could treat them as freelancers for tax purposes, a parliamentary commons select committee heard on Tuesday (20 March).
The Department for Digital, Culture, Media and Sport (DCMS) session examined witnesses who had given written evidence on the “very serious issue”. Those who spoke included Money Box presenter Paul Lewis and Radio 4 Front Row broadcaster Kirsty Lang (pictured), who alleged that the BBC historically “pressured” them into forming personal service companies (PSCs) to be offered work as contractors, rather than as employees.
By working through PSCs, both employer and employee would be able to justify not paying national insurance contributions, though the employee would also be ineligible for basic employment rights including the paid holiday, pensions and sick pay.
The committee said evidence it had received suggested that the BBC had actively encouraged staff to form PSCs, with employees threatened with the non-renewal of their contracts if they failed to comply with the measures.
“I trusted the BBC, I was proud to be part of the BBC and I feel like I have been hung out to dry. I feel like I have been betrayed,” Lang told the committee, describing her experience of being denied paid sick leave when she had to take a month off work after undergoing chemotherapy for cancer. “And I ask: where is their duty of care to me?”
An estimated 200 BBC presenters are currently under investigation by HMRC to establish whether they avoided tax by being paid as contractors while being employed as full-time staff.
“Let me be clear: this isn’t the story of well-paid presenters trading through companies to avoid tax. This is the story of the BBC forcing hundreds of presenters to form companies and treat them as freelancers because it gave the BBC flexibility and ‘protected licence fee payers’,” said Lewis in his evidence to the DCMS.
The complaints were highlighted following the introduction of new IR35 rules for off-payroll workers in the public sector. Under these changes, introduced in April 2017, organisations that took on workers providing services via a PSC or other intermediary became responsible for deducting the appropriate tax and national insurance from payments, where the worker would have been regarded as an employee. This responsibility had previously rested with the individual.
While evidence presented to the BBC suggested that the broadcaster had stopped employing presenters and staff via PSCs following the 2017 changes, staff and presenters who had historically been employed in this way could face significant tax bills from HMRC.
In February, a former BBC presenter caught by the IR35 tax rules was ordered to pay more than £400,000 in unpaid tax after the High Court found she had been effectively employed by the BBC, rather than being a contractor. Witnesses said they had “come to fear the [HMRC] brown [tax] envelope”.
Seb Maley, Qdos Contractor CEO, said the situation outlined to the committee “does not portray the BBC in a good light. Under no circumstance should an engager use its weight and reputation to force a worker down one particular road to save itself money – even more so when the person has placed such trust in the organisation.
“Last year’s public sector IR35 reform means the client will now pick up the tax bill for incorrect status decisions but, given these cases happened prior to the changes, it is the worker who is left to pay any missing tax. If presenters were ‘bullied’ into working self-employed, they cannot be expected to settle potentially colossal fines.”
In a statement issued on Monday (19 March), the BBC said it had set up an “independent process under the supervision of the Centre for Effective Dispute Resolution to determine the right approach in cases where on-air presenters believe the BBC bears some liability in relation to demands for employers’ national insurance contributions”.
It also said it would invite other broadcasters to consider an “industry wide” approach to taxation, but added: “The process will only consider whether the BBC should contribute towards demands for employers’ national insurance contributions, not demands for other taxes that individuals are liable for.”
Andrew Chamberlain, deputy director of policy and external affairs at freelancers’ body IPSE, said the findings showed that the corporation was “falling well below standards” expected for the treatment of its staff.
“By allegedly being coerced into these contracts, these individuals may have been denied employment rights, and some face liability for huge tax bills,” he said.
“The evidence presented gives a distressing insight into the effect the protracted discussions on pay have had on staff and their families. Some have faced working without contracts and pay for extended periods, causing untold stress and financial insecurity.
“This evidence indicates that the BBC is falling well below the standards we would expect in terms of how it treats its staff. It is disappointing that BBC management are not coming in person to answers questions on their handling of these contracts.”
The issue could also reflect broader problems with the application of the IR35 rules, as 70 per cent of recruiters apparently reported a drop in the number of contractor placements since their introduction, and two NHS unions launched legal action over the blanket application of the rules to public sector organisations.
As the government consults on extending the IR35 rules to the private sector, Samantha Hurley, operations director at the Association of Professional Staffing Companies, told People Management that employers and freelancers should look beyond their contracts to scrutinise the working patterns of employees.
“Sometimes all parties can get very concerned about the contract itself and there are businesses that check those and make changes. But you also have to look at the reality of how the worker is working on the client’s site,” she said.
“Are they behaving like an employee? If you are working through your personal service company but are doing the same job as people who are employed next to you, does the client have a lot of control in the ways you undertake that work? If that’s the case, it could be a sign that you are being employed for tax purposes rather than self-employed.”
Questions regarding the employment status of workers were reflected in Matthew Taylor’s report on working practices, with the government recently promising further consultations before it would “make it easier for both the workforce and businesses to understand whether someone is an employee, worker or self-employed – determining which rights and tax obligations apply to them”.
An HMRC spokesperson told People Management: "Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid we put things right."