• BBC presenters in IR35 case must pay thousands back in taxes, court rules

    By Ryan Barnett
    Political Correspondent

    Ryan is a Economic Policy Adviser at IPSE

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    Three BBC presenters must pay hundreds of thousands of pounds back in IR35 taxes, despite a High Court judgement that found the corporation had wrongly forced them to use personal service companies.

    Joanna Gosling, David Eades and Tim Wilcox must pay back HMRC £920,000 after a tribunal ruled their contracts with the BBC fell inside the off-payroll tax rules (IR35).

    The presenters’ case, which has taken eight years to resolve, is one of few high profile IR35 cases HMRC has won. Earlier this year, the tax authority lost its cases against ITV presenters Lorraine Kelly and Kaye Adams.

    BBC put tax risk on presenters rather than corporation

    The three BBC presenters had argued they were self-employed, but the court ruled that because the corporation exercised a significant degree of control over them, payments to them should have been treated as employment income.

    Despite this, the judges stated that the BBC had used its position and power to “force” the presenters into using personal services companies and taking a reduction in pay. This meant that the tax risks were transferred to the presenters rather than the BBC.

    The court also said that the presenters were not warned of the IR35 risks, and that not every contract signed by them fell inside IR35.

    However, the judgement, which was a split decision and resolved on a casting vote, concluded that Gosling, Eades and Wilcox were still inside IR35 and therefore liable to pay more tax.

    There are hundreds of other presenters and contractors facing similar cases against HMRC. The freelancing body, the Association of Independent Professionals and the Self-Employed (IPSE), has warned that the fact that this was a split decision and that it produced a different result to many of the other cases shows just how complex and chaotic IR35 legislation is.

    This is no victory for HMRC, trade body warns

    Andy Chamberlain, deputy director of policy at IPSE, said: “This wasn’t a slam dunk by HMRC by any stretch of the imagination. It was a split decision, IR35 didn’t apply to all of the contracts and the tribunal limited the scope of the tax payments to four years, rather than the full six that HMRC were claiming.

    “This case demonstrated just how confusing and unfit for purpose IR35 is (and) is likely to add to the chaos around the legislation. There is little evidence that HMRC or other experienced tax specialists are confident in how it works.

    “We remain at a loss how the Treasury expects medium sized businesses to accurately apply IR35 to their contractors from next year when HMRC and tax judges struggle.

    “Part of the engagements were not deemed to be inside IR35 on the grounds that Mutuality of Obligation (MOO) didn’t apply, which fundamentally undermines HMRC’s view that MOO is always established in every contract.”

    A spokesperson for the BBC said: “We have tried for a long time to agree a set of guidance with HMRC which gives certainty for the media industry. It’s vital that HMRC now provides the greater clarity which is still needed to avoid others having to go through this ordeal.”

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    AR TaxOkechi OkonJackieAndy C Recent comment authors
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    Andy C
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    Andy C

    If the 3 presenters have to pay £920k back to HMRC – Are they able to offset any of this ‘Tax Bill’ against the already paid amount of Corporation tax that they would have legally paid to HMRC over that period?

    Okechi Okon
    Guest
    Okechi Okon

    This is the point – What happens to the corporation tax they have been paying and also the VAT they have been paying as self employed – Are those going to be calculated against the charge that have been made for PAYE Tax against them ?
    HMRC cannot take the VAT and corporation Tax and still demand that they Pay PAYE TAX. I am sure they must have a way of dealing those payments into the offsetting their bills

    AR Tax
    Guest
    AR Tax

    Dear Okechi, Although there is a mechanism to offset corporation tax payments against any PAYE/NIC due if IR35 applies there is no mechanism to offset VAT payments as the VAT is not the contractor’s money (i.e. VAT is charged in addition to the contractor’s fee, and the contractor should simply just act as an agent and pass this money onto HMRC whilst taking advantage of any VAT reliefs).

    AR Tax
    Guest
    AR Tax

    Dear Andy, From reading the IR35 forum minutes that HMRC publishes there is a mechanism to offset corporation tax paid against the PAYE/NIC tax bill due if IR35 applies. Various IR35 consultancies are asking HMRC to make this process easier.

    Jackie
    Guest
    Jackie

    How can employees be responsible for their employers tax mistakes?

    AR Tax
    Guest
    AR Tax

    Dear Jackie, The 3 media contractors above should consider speaking to a employment law expert to see if there is any chance of recourse against the BBC for being ‘forced’ into a limited company. However given that tax legislation is separate from employment legislation the contractor is responsible for determining their tax position as they are the directors of their own company and therefore have the control of whether or not they paid PAYE/NIC or corporation tax/dividends tax. Although I accept the many contractors will consider the IR35 tax legislation unfair ultimately this is the law and therefore IR35 must… Read more »

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