In the wake of hundreds of presenters and staff being investigated by HMRC, BBC Director General Lord Hall told the Digital, Culture, Media and Sport Committee that over 3,000 radio staff could now be faced with huge tax bills as those operating via personal service companies (PSC’s) may have wrongly classified themselves as self-employed.
Yet another revelation came to the fore last week regarding the so called ‘synthetic-self-employed’. In the wake of hundreds of presenters and staff being investigated by HMRC, BBC Director General Lord Hall told the Digital, Culture, Media and Sport Committee that over 3,000 radio staff could now be faced with huge tax bills as those operating via personal service companies (PSC’s) may have wrongly classified themselves as self-employed.
It has been suggested that in the past the BBC actively encouraged, even pressured, individuals into forming PSC’s so they could work as contractors. By using PSCs the employer and employee would not pay national insurance contributions, although the employee would also not receive basic employment rights including holiday pay, a pension scheme and sick pay.
These practices were addressed by the introduction of new public sector IR35 rules in April 2017. The move saw a shift of responsibility from the employee to the employer, who is now responsible for deducting the appropriate tax and national insurance where a worker would have been considered to be employee. As a result there appears to have been a move to no longer offer contracts to those operating under a PSC.
The Treasury believes a third of people claiming self-employed status under a PSC could be classed as employees with widespread reports that the regime in the public sector will be extended by the Chancellor into the private sector in the Autumn Statement would sounds plausible.
Many point out the shortcomings of IR35 such as its lack of clarity, it is not easy for an employer and employee to understand and apply the rules with consistency. The application of the new rules are also said to have resulted in a drain on resources as workers move away from the public sector creating project delays and cancellations.
There are also many who argue that the Treasury’s contention that this will raise further tax is ultimately flawed. They point out quite rightly that Contractors charge a premium for their services so if they are employed any tax gain would be negated as their income would be lower and therefore also the tax payable. Similarly that the vast majority of the perceived tax loss results from the employer not having to pay employers NIC and not from contributions from the employees.
A more significant concern should be that if the public broadcaster actively sought to reduce its tax bill, and has subsequently stopped employing staff in this manner after the 2017 changes, then what were commercial enterprises likely to be doing historically? Could thousands more now find themselves in the same position? And, what do those self-employed using PSC’s need to do in the future?