back to article BBC presenter loses appeal, must pay £420k in IR35 crackdown

A BBC presenter must pay £419,151 in taxes after a UK tax tribunal ruled her contract should have been subject to IR35 legislation – a judgment that has been described as a wake-up call for IT freelancers. Look North presenter Christa Ackroyd lost her appeal covering tax years 2006/07 to 2012/13, with HMRC contesting that she …

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  1. }{amis}{
    Holmes

    Really!!

    "HMRC denied there is a drift from the public sector and no delays to IT projects due to the new rules."

    It maybe anecdotal evidence but in my circle of contacts i know of 3 people who left government departments and sub contractors of IR35 issues.

    1. MiguelC Silver badge

      Re: Really!!

      They do say that there are no delays to IT projects due to the new rules, the delays are all due to the usual reasons, mismanagement and... err... mismanagement?

    2. TheVogon

      Re: Really!!

      "IT contractors warned to get house in order"

      IR35 isnt really an issue for real IT contractors with compliant contracts. HRMC has lost pretty much every case it has tried to take through the courts.

      1. AndyDayton

        Re: Really!!

        That's what this presenter thought. She thought that her advisers had given her a compliant contract, but HMRC disagreed, and in this case they won.

        1. Anonymous Coward
          Anonymous Coward

          Re: Really!!

          Any news on what is happening to those advisers?

        2. Anonymous Coward
          Anonymous Coward

          Re: Really!!

          I think this story and others covering how you can seemingly never get anything out of the very wealthy just shows the tax system needs simplifying. I don't blame her for trying as I did the same for years. I do think arrangements in IT are by their very nature easier to cover than a TV presenter on a couple of shows which is kind of a little blatant.

          For those that will no doubt foam at the mouth as they down-vote - as a result of my circumstances I earned far more pre-tax than I would have as a permie and (obviously) way more post tax, and went on to spend much more in the economy than I otherwise would whilst also saving to cover for possible times of unemployment. I also, though you may not want to hear it, actually paid more tax as a contractor than I would have as a permie due to the higher remuneration. So, Government got more but not what they wanted and local economy got way more. I won't be losing any sleep over it, not when the likes of <insert wealthy non payer>'s residual requirement would likely cover the UK IT contracting community shortfall.

        3. David 135

          Re: Really!!

          One of the key tests is substitutability - whether you can reasonably provide an alternative. For a programmer that's theoretically quite viable, but for a public face of a show where the value and appeal is their face then there's no direct substitute which is equivalent, so it's not surprising that a presenter would find themselves failing a case like that, really.

    3. Anonymous Coward
      Anonymous Coward

      Re: Really!!

      A .gov programme I've been involved in (private sector supplier, so not directly affected) saw vast swathes leave, only to come back the following week having been given the option of new contract with a compensatory element for being inside IR35, or same rates but a reworded contract.

      We were hugely disappointed, as we'd hoped a couple of them would simply never return.....

      A/c, obvs.

    4. macjules

      Re: Really!!

      Lucky there's a lot of building work going on at HMRC at the moment - lots of sand to stick your head into.

      1. Danny 14

        Re: Really!!

        this has been brewing for a while. back in the day we all ran under umbrella companies as a shield as we were all warned of potential liabilities. oddly enough it became a Dutch sandwich umbrella company and at the time alkost EVERY unisys and dell contractor were running under the same company umbrella.

        when i left this was also being clamped down on.

  2. Tom 7

    Any news on whether the BBC pays their side of the bargain?

    Presumably the BBC should have paid NI and pension stuff too - I hope they make them* cough up for that as its largely their desperate cost saving attempts that have screwed this poor person over.

    * and every other company that tries this too - along with a hefty fine.

    1. Joeman
      Mushroom

      Re: Any news on whether the BBC pays their side of the bargain?

      Now shes deemed to be an employee, she can claim back pay for holiday and sick days.

      no doubt she will take the BBC to court if they don't agree to pay, and the BBC wont have a leg to stand on as its already been proven she was a disguised employee.

      She should come out of this pretty well i would have thought.

      BBC will be forced to cough up!

      1. Anonymous Coward
        Anonymous Coward

        BBC will be forced to cough up!

        Unfortunately not, and that's why the PSC is there.

    2. Shonko Kid
      Unhappy

      Re: Any news on whether the BBC pays their side of the bargain?

      BBC has no liability - that's the whole point of bumping talent to their own PSV company. Christa is effectively her own employer, so a chunk of the tax bill she now faces will be her EmployER NI contributions.

      1. Asylum_visitor

        Re: Any news on whether the BBC pays their side of the bargain?

        I think you've missed the point of the ruling, which effectively has made her an employee regardless of the use of a PSC. The BBC should now be liable for at least the Employer's NI contribution.

        1. Anonymous Coward
          Anonymous Coward

          Re: Any news on whether the BBC pays their side of the bargain?

          unfortunately BBC is NOT being investigated. And I doubt it will be, at least in relation to this case :(

        2. Shonko Kid

          Re: Any news on whether the BBC pays their side of the bargain?

          Wow. Tough crowd.

          I don't think I have missed the point of the ruling, if you run a PSV/PSC and are on a contract that falls within the remit of IR35, then your company is expected to pay both employee and employer NI contributions on the effective salary. The client, in this case the BBC, has no liability if you thought the contract was outside of IR35, but the taxman disagrees. This is the cost saving that has made such arrangements so popular.

      2. Anonymous Coward
        Anonymous Coward

        Re: Any news on whether the BBC pays their side of the bargain?

        My Accountant explained that post IR35 and you were working through a Limited company and paid youself a salary then you had to pay both Employee and Employer NI contributions.

        Naturally those are deductable against any corporation tax you may have to pay later on.

        This presenter did IMHO get some really bad advice from their accountant.

        1. Roland6 Silver badge

          Re: Any news on whether the BBC pays their side of the bargain?

          >My Accountant explained that post IR35 and you were working through a Limited company and paid youself a salary then you had to pay both Employee and Employer NI contributions.

          That is on what you pay yourself, which is typically less than what you invoice. This ruling is effectively saying your personal taxable income is the before VAT invoiced amount (minus a small allowance for expenses) and thus PAYE and NI should have been calculated on this.

          If my memory is correct, this calculation ignores whether you have paid other employees out of your fee, VAT and any other tax collected and paid on the monies. Obviously, any taxes (other than your personal PAYE and NI) paid on the monies received are non-recoverable and cannot be used to offset your liability...

          1. katrinab Silver badge

            Re: Any news on whether the BBC pays their side of the bargain?

            If you pay other employees out of your fee, then you almost certainly won’t be IR35. Right of substitution is a very strong indicator of genuine self-employment.

            1. Roland6 Silver badge

              Re: Any news on whether the BBC pays their side of the bargain?

              >If you pay other employees out of your fee, then you almost certainly won’t be IR35.

              I was referring to your companies 'staff' eg. the undergrad you've employed to get some work experience and do some research.

              >Right of substitution is a very strong indicator of genuine self-employment.

              It is; however, I suspect HMRC will challenge this if it hasn't been invoked - particularly in a long contract.

              For many years, colleagues with long-term contracts with one client would swap around every few months for a week or so and get paid through each others company. This helped both with IR35 and with avoiding the 24-month rule.

        2. Anonymous Coward
          Anonymous Coward

          Re: Any news on whether the BBC pays their side of the bargain?

          "My Accountant explained that post IR35 and you were working through a Limited company and paid youself a salary then you had to pay both Employee and Employer NI contributions"

          Hence why you pay yourself a salary below the NI threshold and take the rest as dividends.

          1. Anonymous Coward
            Anonymous Coward

            Re: Any news on whether the BBC pays their side of the bargain?

            And of course you set your salary at a level that means you pay minimal NI, but still get the benefits - trebles all round!

      3. AndyDayton

        Re: Any news on whether the BBC pays their side of the bargain?

        well no, mainly it sounds like Ackroyd was avoiding tax and NI.

    3. FIA Silver badge

      Re: Any news on whether the BBC pays their side of the bargain?

      I hope they make them* cough up for that as its largely their desperate cost saving attempts that have screwed this poor person over.

      She was a highly paid presenter, reportedly on over 100K a year. If she's not been paying NI on that wage then she's certainly not 'poor'.

      Christ, the hospitals are at breaking point, there's fewer and fewer police on the streets, yet it's a tragedy when people are asked to actually pay their fair contribution to society.

      I appreciate she's been given bad advice, and it's not her fault. But I, and a good chunk of the people reading this have to pay NI; don't have a lot of sympathy for those that don't.

      1. lglethal Silver badge
        Go

        Re: Any news on whether the BBC pays their side of the bargain?

        I dont want to sound like an American here, but if she obtained advice from a tax accountant that says what she was doing was legal - and assuming she followed all of the tax accountants advice as to what she had to pay etc, etc to Keep it legal - then can she sue the accountant for giving false advice?

        (admittedly, she probably heard the "its legal" part and stopped listening at the part where the accountant started saying "... but you have to do this, this and this.. and pay this and this ... etc.")

        1. Lysenko

          Re: Any news on whether the BBC pays their side of the bargain?

          assuming she followed all of the tax accountants advice as to what she had to pay etc, etc to Keep it legal - then can she sue the accountant for giving false advice?

          That can get tricky. Unlike criminal law, you can't generally sue someone (successfully) just for being wrong - you have to prove that the error was deliberate or negligent. Given that this ruling is seen as significant, it follows that the accountants have a good defence on the basis that their advice was an honest, competent opinion at the time it was given.

          1. Dan White

            Re: Any news on whether the BBC pays their side of the bargain?

            Tax accountants will (must) have professional indemnity insurance that will cover them in the event of legal action. It almost certain that the insurance would pay out to compensate her if she sued.

            Nobody wants to risk losing a court case and setting a precedent that could make *all* firms liable in these circumstances. Better to pay off a small percentage of people that can be bothered to take action than be proven to be liable for *all* cases.

        2. Hollerithevo

          Re: Any news on whether the BBC pays their side of the bargain?

          It's why insurance companies offer fee protection insurance. If she had this, she could cover botht he repayments and the court costs, depending on her policy.

        3. katrinab Silver badge

          Re: Any news on whether the BBC pays their side of the bargain?

          Yes she coule sue, but any award would only put her back in the position she woukd have been in had she been given correct advice - that she was liable to pay the tax, so it would cover only the late payment and misdeclaration penalties, not the actual tax itself.

      2. Peter2 Silver badge

        Re: Any news on whether the BBC pays their side of the bargain?

        She was a highly paid presenter, reportedly on over 100K a year. If she's not been paying NI on that wage then she's certainly not 'poor'.

        This is what GOV.UK thinks yearly personal income is by percentage points.

        https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax

        So, to pay £419,151 for a period of 2006/07 to 2012/13 (6 years) is £69,858.50 of tax each year. Even if you assume she was taxed at 50% then she's in the top 1% of earners in the specified years.

        Christ, the hospitals are at breaking point, there's fewer and fewer police on the streets, yet it's a tragedy when people are asked to actually pay their fair contribution to society.

        I appreciate she's been given bad advice, and it's not her fault. But I, and a good chunk of the people reading this have to pay NI; don't have a lot of sympathy for those that don't.

        Personally, my sympathy is zero for the top 1% of earners who have dodged tax and are now required to pay it. The question has to be asked though as to if the BBC as a public body is operating a tax avoidance office at the public expense to further line the pockets of a large number of the richest 1%.

        Perhaps BBC news could do one of their "fact checks" on this?

        1. Roland6 Silver badge

          Re: Any news on whether the BBC pays their side of the bargain?

          >Even if you assume she was taxed at 50% then she's in the top 1% of earners in the specified years.

          It is worse, this is unpaid tax over and above what she has already paid.

          Additionally, at this wage level if she had been with the BBC in 2016-17, her name would have appeared in the Pay Disclosure Annex of the BBC's annual report - potentially increasing the number of highly paid women and thus directly impacting the BBC's gender pay gap.

          >Perhaps BBC news could do one of their "fact checks" on this?

          Well this is what they are currently reporting:

          http://www.bbc.co.uk/news/uk-england-43074584

          1. Doctor Syntax Silver badge

            Re: Any news on whether the BBC pays their side of the bargain?

            "Additionally, at this wage level if she had been with the BBC in 2016-17, her name would have appeared in the Pay Disclosure Annex of the BBC's annual report - potentially increasing the number of highly paid women and thus directly impacting the BBC's gender pay gap."

            This would be another advantage for the Beeb. If they'd both been directly employed and she was paid significantly less than, say, Harry Gration, the Beeb could have been on the hook under equal pay legislation. With freelancers each arrangement is independent. Now it's gone political, of course, that isn't such a big concern.

          2. Gordon Pryra

            Re: Any news on whether the BBC pays their side of the bargain?

            Additionally, at this wage level if she had been with the BBC in 2016-17, her name would have appeared in the Pay Disclosure Annex of the BBC's annual report

            The entire point to that report was to give the public the idea that although some were paid a lot of many, like that Radio 4 presenter, there were not to many of the fat cats being minted by the tax payer.

            Total fabrication of course, as the majority of the "talent" are classed as self employed and thus hid their remuneration from this report.

        2. David Nash Silver badge

          Re: Any news on whether the BBC pays their side of the bargain?

          "Personally, my sympathy is zero for the top 1% of earners who have dodged tax "

          I agree with that sentiment but in this case it sounds like she simply did what she was told by the BBC and her accountant, rather than having "dodged" tax. It's not illegal nor immoral to pay the tax due and no more. And if she believed that is what she had done, it's not fair to suggest she was a tax dodger.

      3. Doctor Syntax Silver badge

        Re: Any news on whether the BBC pays their side of the bargain?

        "She was a highly paid presenter, reportedly on over 100K a year. If she's not been paying NI on that wage then she's certainly not 'poor'."

        As a freelancer she will have been paying both employer's and employee's NI from such portion of that sum as she takes as salary. Given that there's no guarantee of long-term re-engagement or, indeed, payments should she fall ill, she should have banked a good deal of that payment for future income should the engagement cease. She would also have to make her own provision for pension. These are issues that HMRC neglect to take into consideration. They only really understand PAYE as that's how they're paid. Their employment includes a degree of permanence not available to freelancers. It ought to be valued as a perk of the job and taxed accordingly.

        1. Yet Another Anonymous coward Silver badge

          Re: Any news on whether the BBC pays their side of the bargain?

          from such portion of that sum as she takes as salary

          Which was presumably a nominal amount

          She would also have to make her own provision for pension.

          Like the rest of us

          a degree of permanence not available to freelancers

          She had a guaranteed 7 year contract - that's a lot more 'permanent' than most of us

        2. Mr Sceptical
          Stop

          @Doctor Syntax

          "Their employment includes a degree of permanence not available to freelancers. It ought to be valued as a perk of the job and taxed accordingly."

          Hang on - so I, as co-founder of a company (& thus employee of it according to HMRC); now employing 25 staff, should considering successfully growing the company to this size a PERK?!?

          The risk is all mine; I had many years of living on the breadline to get to this point, and if it goes wrong we all have no employment, so strongly reject the idea that it's anything other than a giant sense of responsibility to others and cause of sleepless nights.

          So anyone claiming my employment is a 'perk' can *£&! right off...

        3. Anonymous Coward
          Anonymous Coward

          Re: Any news on whether the BBC pays their side of the bargain?

          “It ought to be valued as a perk of the job and taxed accordingly.”

          It should be - as should index-linked final salary pensions with a state guarantee, and all those expenses MPs can claim the rest of us can’t .... but they won’t be ...

      4. Kubla Cant

        Re: Any news on whether the BBC pays their side of the bargain?

        I, and a good chunk of the people reading this have to pay NI; don't have a lot of sympathy for those that don't.

        This seems a bit unfair on those of us who have slogged through 45 years to reach State Retirement Age, after which NI is no longer payable.

    4. Anonymous Coward
      Anonymous Coward

      Re: Any news on whether the BBC pays their side of the bargain?

      Any news on whether the BBC pays their side of the bargain?

      If they do have to pay, it will be the public, via the television tax.

      1. PNGuinn
        WTF?

        Re: Any news on whether the BBC pays their side of the bargain?

        "If they do have to pay, it will be the public, via the television tax."

        No, it'll be the tele tax paying public who will gain if this rids them of some of the overpaid celebutards they have to suffer.

        Well, they can dream ...

        1. Danny 14

          Re: Any news on whether the BBC pays their side of the bargain?

          problem is, the same rules applied for those contactors being paid 20k and also running as single director companies or under umbrella companies.

          not everyone doing this was a moneybags.

    5. Doctor Syntax Silver badge

      Re: Any news on whether the BBC pays their side of the bargain?

      "Presumably the BBC should have paid NI and pension stuff too"

      I believe HMRC are responsible for enforcing compliance with workplace pension scheme legislation. Are they providing such a scheme for their IR35-caught freelancers? If not, why are they not prosecuting themselves.

    6. AndyDayton

      Re: Any news on whether the BBC pays their side of the bargain?

      The BBC never employed her as such. The HMRC can't give someone a job at the HMRC, maybe the BBC would never have wanted her as an employee. What the HMRC can claim is that she owed them tax and NI for the type of contract she entered in to, but that doesn't mean the BBC owes her anything.

  3. Lee D Silver badge

    If you're freelance and you aren't being paid enough to pay full tax like an employee would, when effectively working as an employee, then that's cheating. Either on the employer's side or the freelancer's side.

    If you're a freelancer using such arrangements to avoid tax... pay your tax.

    If you're not able to pay that tax from your earnings, then demand more money or move on. If you're claiming to be freelance, this basically means "increase your prices".

    If you demand more money and they need you, they'll pay you.

    Though it's an upheaval, it's been long-coming and I don't get the fuss any more.

    1. Anonymous Coward
      Anonymous Coward

      Suggest you read up on company law, most IT consultants run limited companies.

      One rule for the corporates, another for the little guy's.

    2. Anonymous Coward
      Anonymous Coward

      Indeed we have contractors that have been working essentially full time for years, using employee perks, going to employee social events, being employees in all but name (and salary). Time they got caught out methinks...

      1. AndyDayton

        using employee perks can be evidence of employment.

      2. Anonymous Coward
        Anonymous Coward

        Indeed we have contractors that have been working essentially full time

        Thats called fostering relationships with your client, Ferengi rule 983

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