According to the Mirror newspaper, the BBC is financially assisting some of its former contracting professionals who were badly hit by “inside IR35” re-designations and huge tax bills after the rules were reformed in the public sector last year.
The help will apply to TV and radio show employees working via personal service companies who were paid below £45k and were caught by the new off-payroll regulations. The paper reports that the BBC is planning to pay up to 1,000 employees’ fees at approximately £1,000 each. The expected total is in the region of £1m in licence fee money to compensate the affected workers for their increased tax and accountancy costs while working within IR35.
The IR35 reforms have controversially shifted responsibility for determining a contractor’s employment status for tax purposes from the individual contractor to the public sector end-client or recruitment agency, even though the latter were not versed in the complex case law upon which IR35 determinations rest. The radical overhaul of the rules followed concerns by HMRC that many public sector bodies, including the BBC, were transferring employees to contractor status in order to dodge employee tax and national insurance obligations.
However, Qdos Contractor, the leading tax advisory service for contracting professionals, has questioned whether this reimbursement is remotely sufficient. A query which is especially pertinent given findings by Recruiter magazine that the total number of workers who receive the assistance is appreciably fewer than 1,000 and the payout will be closer to £500 per worker.
Seb Maley, CEO of Qdos Contractor, said that on the basis that the Mirror report had substance, it appeared that the BBC had begun to understand the impact that IR35 has had on all contracting professionals, and not simply the highest earners. That, he said, was at least a welcome step in the right direction.
However, he continued: “That said, the speculated £1,000 compensation is frankly nowhere near enough to fully reimburse any contractors who have spent a substantial period of time incorrectly working inside IR35, which can increase costs for these workers by up to 30 per cent.
“Contractors might well take the BBC up on this offer, but any of these workers wrongly placed inside IR35 by the organisation will be left wondering why they couldn’t make an accurate status decision in the first place.”
As the government is currently consulting on extending the revised rules to the private sector, Maley urged any firm engaging a contractor to learn from the BBC’s mistakes and appreciate that this legislation has proven an enormous financial and psychological burden for freelancers, while incorrect decisions can easily cost companies millions.