HMRC has defeated three BBC presenters in an IR35 tax tribunal ruling which is expected to have significant repercussions for the broadcasting industry.
Bar a couple of engagements, presenters David Eades, Tim Willcox and Joanna Gosling were all deemed within scope of IR35 during a series of contracts with the BBC. They have thus failed in their appeal against an accumulative tax bill of £300,000, although HMRC will not be able to recoup the full sum.
Though the two tribunal judges took opposing views over the IR35 status of the presenters, the cases were decided on the casting vote of Judge Harriet Morgan, who concluded that there was: “sufficient mutuality and at least a sufficient framework of control to place the assumed relationships between the BBC and the presenters in the employment field.”
HMRC fails to convince tribunal of presenter carelessness
However, HMRC was denied in its pursuit of tax demands for a number of the years in question, after the tribunal found that the presenters and their advisors had acted in good faith, contrary to the taxman’s claims. This was acknowledged in a statement released by the presenters:
"We are both pleased and relieved to say that the Tribunal has also found that we acted in good faith, dismissing HMRC’s claim that we - or our accountants - were careless about our tax affairs in any way. As a result, the Tribunal ruled that HMRC could not pursue its tax demands for a number of the years in question. We are delighted that our accountants were also deemed to have acted in good faith throughout. Given some of these findings, we are considering with our legal advisers whether to appeal."
“We have endured eight years of HMRC investigation and eventual determinations to reach this point on what is clearly a difficult and unclear subject even for judges. It has been a depressing and stressful period for each of us. However, we are grateful that the judgement, in its entirety, shows we have acted in good faith throughout.”
As ContractorCalculator CEO Dave Chaplin highlights, HMRC’s failure to prove carelessness provides a valuable lesson for contractor clients: “One positive takeaway is that HMRC failed to discharge its burden of proof regarding carelessness, meaning it could only claim sums for arrangements going back four years, rather than six. This should issue a stern reminder to firms hiring contractors under the Off-Payroll regime – don’t ignore the detail.”
BBC practices expected to face further scrutiny
The decision will likely result in further scrutiny of the BBC’s hiring practices. In February 2018, the emergence of the Christa Ackroyd IR35 ruling revealed that the presenter had entered into a personal service company (PSC) upon the BBC’s insistence. She consequently lost her appeal against a tax bill in excess of £400,000. Although that result was appealed to the Upper Tribunal and we are awaiting it's decision.
In this latest case, the tribunal acknowledged that the BBC had left the presenters with no choice but to provide their services via limited companies, and had failed to warn them of the IR35 risks. Issuing a damning indictment, the judgment noted: “The BBC were in a unique position and used it to force the presenters into contracting through the PSCs and to accept reductions in pay.”
“You can’t help but feel some sympathy for the affected broadcasters, who were forced into a way of working by the BBC with no forewarning of the risks involved,” comments Chaplin.
“Unfortunately, with so many broadcasters having been unaware of the perils of IR35, the industry is providing HMRC with some welcome opportunities. It is only right that the BBC should shoulder much of the blame.”
Chaplin adds: “The presenters’ positions weren’t helped by their contracts, which could have been drafted much clearer, to reflect their real intentions of being self-employed. Firms hiring contractors should learn lessons from this case.”
BBC presenters ruling could inform similar claims
In October 2016, it was revealed by ContractorCalculator that more than 100 BBC presenters who had provided their services via a PSC were being targeted in a mass IR35 clampdown by HMRC, which was also monitoring the wider broadcasting industry.
HMRC subsequently issued a number of tax bills to many of the presenters involved. Gosling, Eades and Willcox were the first to use the tribunals to contest their liability, which HMRC claimed had accumulated over a number of years prior. Though the ruling has only now released, tribunal proceedings took place over two weeks in May 2018.
“As demonstrated by the outcome in this tribunal, subsequent appeals by BBC presenters can’t promise a happy outcome,” highlights Chaplin. “However, you can expect that many BBC presenters’ arrangements will bear similarities to those of the Eades, Willcox and Gosling, and so at the very least this ruling can help inform other broadcasters in deciding whether to challenge the taxman.”
What does the BBC think
A BBC spokesperson said: “We want to help presenters resolve any historic tax issues they face because of the way their employment status is now being assessed. We are reviewing the judgment and will work with each of the presenters to agree how we will help them.
“We have acknowledged that many years ago the BBC introduced a policy of engaging certain freelance presenters through PSCs where they were understood to be self-employed. We have also said that where people now face a challenge as a result of this we want to put this right as quickly and effectively as possible. We understand and regret the stress this has put people under, and have set out the principles of how we will help presenters in a way that is fair to the individuals involved, to HMRC and to licence fee payers.
“Recent hearings involving presenters from across the media industry have produced a range of outcomes and this split judgment further demonstrates the confusion of the tax system for those working in broadcasting.
“We have tried for a long time to agree a set of guidance with HMRC which gives certainty for the media industry. It’s vital that HMRC now provides the greater clarity which is still needed to avoid others having to go through this ordeal.”