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Markel Tax

29 Nov 2018

National Audit Office publishes its report on the examination of the BBC’s engagement of PSCs

In its published report of the examination of the BBC’s engagement of PSCs and implementation of IR35, the National Audit Office (NAO) exposes the BBC’s questionable conduct along with highlighting HMRC’s lack of guidance and coerced use of the inadequate (Check Employment Status for Tax) CEST tool. As the report explains:

Between 2000 and 2004, the BBC had a perception that there was a low risk of reclassification of its self-employed freelancers. It used the industry specific guidance available at the time to determine employment status for tax purposes. 

Following the Neil Report in 2004, the BBC imposed stricter editorial controls on news readers. A review of 100 newsreaders (engaged on a self-employed freelance basis) led HMRC to conclude that these controls were sufficiently significant that the freelancers should be engaged on an employed basis for tax purposes. The BBC then implemented a new policy and gave these newsreaders a choice: 1) sign an employment contract, or 2) incorporate and operate through a PSC. According to the BBC, the majority chose to engage via their own PSC. 

For other TV and radio presenters, in the absence of specific guidance, the BBC continued to assess employment status based on other guidance and its understanding of case law. 

HMRC published its radio industry guidelines in 2008. Due to its concerns that these guidelines were unclear, the BBC adopted a policy of hiring radio presenters via PSCs if they were higher paid or on longer term contracts. Unlike news presenters, these individuals were not offered employment. This policy was extended to TV presenters at the same time, meaning that these freelancers had a different choice: 1) contract with the BBC via PSC, or 2) do not contract with the BBC. The inference from this statement is clear: the BBC believed these affected freelancers to be employed for tax purposes, but encouraged engagement via PSC, insulating itself from the risk of liability for those engagements it considers should be treated as employment for tax purposes.

Many freelance presenters have alleged that the BBC forced them to create PSCs in order to continue working. The presenters said that there was little explanation as to the change in the BBC’s policies, and they criticised the fact that most communication about this was verbal, leaving presenters confused. The report states that it had seen some evidence that the BBC had told freelancers to seek independent advice, but could not confirm that this occurred in all cases.

In 2018, an email from the BBC acknowledged that policies adopted in the past may not have given individuals as much choice as they would have liked. The BBC’s defence of this was that this was to limit its risk of reclassifying freelancers’ employment status and the resulting liabilities, but also that it was not best placed to assess the status of its freelancers. We find this a particularly interesting argument as we at Accountax, among many other advisers, voiced the same concerns over the public sector legislation that the public sector body is not best placed to decide whether IR35 applies.

In anticipation of the reform of IR35 in the public sector from April 2017, HMRC developed its CEST tool, and this was widely available in March 2017.

Whilst the use of the CEST tool was not mandatory (and industry experts criticised the tool as unfit for purposes) according to the BBC, HMRC had confirmed to it that HMRC would only stand by its own CEST results and determinations of employment status. In the absence of more industry appropriate advice, this left the BBC with little option but to use the tool if it wanted any amount of certainty as to the status of its PSC freelancers.

Compared to the use of the BBC’s own previous tests and HMRC’s guidance, the CEST tool generated different results in many cases. In almost half of on-air cases, the CEST tool’s result was that it was ‘unable to determine’ the employment status. 

Prior to April 2017, the BBC’s own assessments resulted in the majority of on-air freelancers being assessed as self-employed. Only after months of further discussion with and guidance from HMRC did the BBC feel it could rely on the CEST tool.

Between August 2017 and June 2018, 663 on-air presenters were assessed by the BBC using the CEST tool, 92% of which resulted in an ‘employed for tax purposes’, meaning these PSCs would be paid net of tax and NI. 

The BBC’s implementation of the April 2017 reform has adversely affected its relationship with some of its presenters. Many think the BBC poorly handled the changes, and many also consider the BBC to bear some responsibility for HMRC’s tax demands for periods prior to April 2017 after having required presenters to operate via PSCs, and having received misleading or limited information from the BBC. 

The BBC has taken steps to help individuals affected by the reforms, including bridging loans, and contributions towards additional bookkeeping fees arising from IR35 compliance changes.

In addition, the BBC has announced an intention to set up a mediation process for cases where on-air presenters hired via PSCs believe the BBC bears some responsibility for employer’s NI relating to before April 2017, and has also approached HMRC to discuss an alternative approach to resolving historical cases. Discussions are ongoing and a resolution has yet to be reached. 

At Markel Tax we have certainly seen an increase in the number of IR35 enquiries, in respect of presenters, we are dealing with over the last two years. We are particularly interested in seeing what happens next and whether HMRC reach any clearer conclusions with the BBC as this will have a further reaching impact on the industry as a whole.

We have been advising such individuals and PSCs in the entertainment and presenting industry for many years. If you would like to discuss this or any other matters with us please contact us directly on 0345 066 0035 or by email at
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