The BBC has published a report into how it currently engages freelance contractors, and will introduce changes from April 2013 which are likely to reduce the number of freelancers hired via their own personal limited companies.
The review was commissioned following the Alexander Review into the ‘off payroll remuneration’ practices of public sector organisation, and was conducted by Deloitte LLP and the BBC’s Internal Audit Department.
Following the public outcry into perceived tax avoidance by some high profile public servants who were engaged via their own personal companies rather than the payroll, many BBC stars were found to be contracted on this basis – as well as a number of ‘off air’ freelancers.
Main report findings
- The review found that freelancers were an essential resource for the BBC – both in terms of flexibility, and offering good value for money. The broadcaster engaged over 64,000 freelancers in 2011/12 alone.
- Deloitte LLP agreed that the BBC had not attempted to save income tax or National Insurance Contributions by encouraging staff to work via their own limited companies (hirers are not liable to employers’ NICs if they engage freelancers on this basis).
- Although most BBC freelancers are covered by existing HMRC tax guidance, it would appear that some ‘on-air’ roles are not covered by this guidance.
- The BBC will review the terms of its longer-term presenter contracts, and in cases where individuals should be classified as ’employed’ rather than ‘self employed’, they will be offered staff contracts from April 2013 onwards.
- The Corporation will undertake a full review of all its current on-air limited company and sole trader contracts, and expect many current limited company workers to become ‘staff’ when their contracts expire.
New employments tests
Interestingly, the report states that the BBC will introduce a new ’employment test’ to determine whether an individual is going to be engaged on terms akin more to that of an ’employee’ rather than a self-employed freelancer. This will determine whether the individual will be offered a staff contract, or will be engaged via a personal service company.
The BBC will also work with HMRC to establish clear and consistent rules for the tax treatment of ‘on air talent’.
Why are ‘special rules’ needed?
It will be interesting to read industry reaction to the review, as IR35 already exists to deal with cases of ‘disguised employment’, and the new business entity test provides a rigorous examination of an individual’s working practices to determine their risk of an IR35 investigation. It appears unclear why individuals who fall into the ‘on-air talent’ category would require their own employment status test.
Kate Cottrell from Bauer & Cottrell said that, on initial inspection, it would appear that the BBC would want to be able to confirm the status of a role from the outset:
“Essentially if they get HMRC’s agreement they could advertise the role/job with the appropriate status thereby negating any risk for all. The main thing is that this is a ‘special’ industry because of all the rules for behind camera/front of camera workers, etc. The HMRC film and TV unit has been in place for many years and has worked very closely with the likes of the BBC.”
You can download the full report here.