In IR35

Recent criticisms of the BBC over its handling of presenters who were forced into contracting via personal service companies and then “hung out to dry” after being caught by new IR35 rules is justified but one-sided, a leading contractor tax advice consultancy has claimed.

On 25th April, the Telegraph reported that a number of presenters had been left in such financial difficulty after discovering they had been deemed “inside” the reformed public sector IR35 rules that the BBC had felt obliged to offer them loans and advances to help them manage the enormous tax bills they faced.

One presenter, Christa Ackroyd, lost her appeal at a tax tribunal earlier this year and was hit by a tax bill of £419,000. While the tribunal found that HMRC was right to designate her an employee for tax purposes, it also stated in its report: “She took professional advice in relation to the contractual arrangements with the BBC and she was encouraged by the BBC to contract through a personal service company.”

A Commons Select Committee hearing in March found that Ackroyd was certainly not alone in finding herself in this dire financial predicament. Several presenters explained that they had suffered similar fates, and one anonymously shared that she had been driven to such despair that she had attempted to take her own life.

While the BBC recently explained to the Public Accounts Committee (PAC) that it recognises an obligation to help those presenters currently facing temporary but acute financial distress with loans and advances, Qdos Contractor Consultancy Manager Katy Hardy pointed out that HMRC has remained silent about the distressing debacle, despite the fact that the BBC has laid some of the blame firmly at their door.

BBC Director General Lord Hall told the PAC hearing that the presenters involved had found themselves in this predicament partly because of a series of changes made by HMRC concerning how such contracting staff should be treated for tax purposes. He described the IR35 assessment tool, CEST, supplied by HMRC as “not fit-for-purpose” and said that it had in some instances caused real hardship.

The tool was in fact severely criticised in the Select Committee hearing, and subsequent Freedom of Information replies from HMRC instigated by ContractorCalculator found that HMRC had no evidence for the tool’s accuracy. This may mean that thousands of contractors have been wrongly redesignated as inside IR35.

Hardy writes: “… it will be interesting to see what HMRC will do to resolve this and to regain their trust. The only people not paying for their mistakes at the moment appears to be HMRC.”

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