This findings of this report have now been cited as evidence that the Government should hold back before introducing further IR35 legislation - which is widely expected.
The report from the Department of Culture, Media and Sport Committee
‘BBC Annual Report and Accounts 2017–18: Equal pay at the BBC’, provides details of how the organisation ‘coerced’ presenters into working as contractors or face having their contract cancelled. Many presenters forced into this situation are now being investigated by HMRC for wrongly operating outside IR35.
The report condemned the broadcaster for causing ‘life-altering’ financial and emotional consequences for many presenters’ and stated that between 2007-2012 the BBC followed a policy to engage presenters through PSCs when contracts were likely to exceed six months or be worth over £10,000. It also documented; ‘We have seen strong evidence that the BBC made presenters feel that a PSC was a mandatory condition of work. This is a disgrace.’
The report went on to call for the BBC to offer compensation for financial loss to individuals coerced into setting up Personal Service Companies who face substantial claims for outstanding tax.
The Chair of the Committee Damian Collins MP said: "As a direct result of the BBC’s policy of insisting that presenters set up Personal Service Companies, many are now facing bills of hundreds of thousands of pounds in unpaid income tax and national insurance contributions. These are life-changing consequences.
"Where there’s evidence that people were coerced into setting up these companies so they could carry on working as presenters, the BBC should offer compensation to cover their losses.
"The fact that presenters were also cut adrift by losing out on maternity pay or sick pay is deplorable. It was unforgettable to hear BBC presenter Kirsty Lang describe how she continued working throughout her treatment after being diagnosed with cancer."
MPs condemned the imposition of PSCs as falling short of standards expected by the BBC.
The Committee welcomed the BBC’s decision to launch a grievance process for presenters under independent supervision to establish whether it should bear some liability for unpaid national insurance contributions. In cases where it is clear people were coerced into setting up a PSC in order to carry on working for the BBC and face substantial claims for outstanding tax, the BBC should offer compensation for financial loss.
Freelancer groups and experts used this report to reinforce their call to the Chancellor to delay the predicted clampdown on IR35 in the private sector - which is expected to be announced in next week's Budget.
Seb Maley, CEO of IR35 specialists, Qdos Contractor, said: “In the vast majority of cases, contractors choose to work in this manner for the freedom it offers and not, contrary to stereotyping, for greater tax efficiency. This BBC case is slightly unusual though, and the individuals affected were pushed into this working arrangement purely for the benefit of the organisation. Judging by the report, it’s not something the individuals affected would have chosen to do.
“Ultimately, it’s a damning indictment of the BBC’s mishandling of presenters’ IR35 status, and many individuals are still living through the financial and emotional consequences of it. Therefore, it’s important that any organisation engaging contractors doesn’t set a policy that forces them into a working arrangement for its own financial benefit, or simply out of convenience.
“In almost all cases, contractors want to work outside IR35 and in our experience, most contractor engagements actually belong outside IR35. That said, each working arrangement needs to be carefully assessed to prevent mistakes being made.
“With private sector IR35 changes looking increasingly likely, the BBC’s mismanagement of IR35 is something millions of engagers must be very aware of."
Freelancer group, IPSE, said that the BBC tax fiasco is 'the tip of the iceberg' if IR35 is rolled out
IPSE said: “The BBC’s handling of the tax affairs of its presenters has been shambolic and is a direct result of crude and unworkable Government tax policies.
“This episode particularly demonstrates the folly of Government’s changes to IR35 legislation.
“The BBC, faced with the impossible task of having to make thousands of IR35 determinations with the help of the flawed CEST tool, simply declared many presenters to be self-employed. This blanket decision unleashed the chaos which the Committee has condemned.
“This debacle highlights that the tax system is outdated and inherently complex. We need a system that provides more clarity for individuals and properly reflects the way people work in the modern economy. It is time we had a proper independent review to examine how we deal with this complex issue, rather than tinkering at the edges which will only lead to further confusion.
“But it is not just the BBC, however; the entire public sector has faced similar issues since the legislation changed in April 2017 – not least the NHS, which has faced skills shortages after a blanket decision that all their contractors were falsely self-employed.
“Even more worryingly, government plans to roll out this same disastrous change in the private sector. The Chancellor should think twice if he wants to avoid a repeat of the chaos seen at the BBC and many other public sector bodies since the reforms were implemented last year. If not, the BBC’s situation is just the tip of the iceberg.”
For more information about the controversial IR35 tests and rules; and other aspects of IR35, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2018