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Self-Employed BBC staff forced to pay tax as employees due to flawed employment test

Genuinely self-employed freelancers and contractors with BBC contracts are being forced to pay tax like employees because the corporation is using a deeply flawed employment test to evaluate its freelancers’ status.

As a result of this unfair treatment of BBC freelancers, tax and employment status expert David Kirk, of David Kirk & Co, believes that the BBC’s use of the test should be subject to a judicial review.

“This is not the correct way of going about determining employment status,” warns Kirk. “A public authority can be subjected to a judicial review if its procedures are illegal. The BBC’s employment test is a vitally important procedure and that procedure is flawed.”

The BBC and HMRC are widening the scope

Until now, it is believed that the BBC has focused its attention on presenters and other freelancers working on its news and current affairs. There is some concern now that thousands of freelancers contracted to work on other factual content programmes, such as sports and documentaries, will be affected.

Furthermore, ContractorCalculator CEO Dave Chaplin highlights that the problem may no longer be isolated to the BBC: “Our sources confirm that HMRC is spreading its net wider, and looking beyond the BBC at independent television broadcasters and the production companies that develop so many programmes.”

A public authority can be subjected to a judicial review if its procedures are illegal. The BBC's employment test is a vitally important procedure and that procedure is flawed

David Kirk, David Kirk & Co

Kirk’s concern is that the BBC has botched the legitimate job of identifying disguised employees in its freelancer roster because of pressure from the Public Accounts Committee of the House of Commons (PAC).

He explains: “The BBC was caught up in the furore that erupted about off-payroll arrangements in the civil service during 2012. It did itself no favours when the corporation’s head of employment tax appeared in front of the PAC on 16 July 2012 and clearly did not know what he was talking about. As a result, neither does the PAC.”

Why is the BBC’s test so flawed that a judicial review is needed?

According to Kirk, who has written one of the definitive books on the subject of employment status, it is simply impossible to condense the tests of employment status into a single page of questions, as the BBC has done, and expect a meaningful outcome.

“HMRC’s Employment Status Manual (ESM) is 370 pages long and there are about 200 cases that are relevant to employment status. The BBC test’s initial flaw is its brevity, closely followed by the fact that it bears no resemblance to the actual key tests of employment.

“The first question, ‘does the BBC have significant editorial control over the content and activities outside the BBC?’, shows a disastrous confusion between control over output and control over presenters.”

Kirk notes that the test refers to clauses 4.4.13 and 15.4.2 of the BBC’s Editorial Guidelines, which either contradicts or makes a nonsense of the question asked: “Clause 15.4.2 specifies control over what BBC freelance presenters can’t do. This is not a recognised employment test. The case law refers to control over what, when, where and how. There is nothing about control over what is not done.”

No mention of mutuality or being in business

Following the first question the BBC test’s second question manages to avoid mentioning two other key employment factors. Kirk explains: “The BBC asks if the individual provides ‘significant creative input into the show, providing scripts, formats, facilities or staff’,and says that the person is self-employed if so.

This is not necessarily so. “Simply providing scripts, for example, could well be done under some sort of control. This question as framed is not a recognised test of employment, and there is nothing about mutuality of obligation or ‘being in business on your own account’.

Kirk highlights that question three, which asks “Is the work a one-off show and go performance with no other commitment?’, is simply confusing. The freelancer may work on the one-off show and be told what to do all day. Equally, they may not.

Substitution should be at the top of the list

The penultimate question asks ‘Is the role one where the BBC would allow a substitute to be provided by the talent engaged?’. Kirk’s view is that this should be one of the first questions of any employment status test: “If an individual has a genuine unfettered right of substitution, then it is their ‘get out of jail free’ card to play and they cannot possibly be employed. This question ought to be at the top. The trouble with having this test right down here is that they will already have discarded a number of people from consideration of it before they get to it.”

The final question is the first sign of any kind of ‘in business on your own account’ test:

‘Is the individual providing major equipment or facilities that are fundamental to the production for the delivery of the show?’

Kirk says: “This is relevant, but it is only one of a number of indicators that ought to be looked at. There is nothing in these tests about the ability to profit from sound management, the contractor’s business structure, exclusivity, payment terms or rights of dismissal.”

Flawed public body processes should undergo judicial review

The BBC’s test is so woefully inadequate and runs such a huge risk of incorrectly classifying freelancers as employees and forcing them to pay more tax than they should, that it should be the subject of a judicial review.

“It will be easy for the BBC to classify someone with the wrong status, calling the genuinely self-employed employed,” says Kirk. “This test is not the correct way of going about determining employment status.

“HMRC has been on to this issue with BBC freelancers since 2004 and it is like the taxman is on a mission. And it was round about then that the BBC’s editorial guidelines were published, which have been incorrectly interpreted as putting freelancers subject to these guidelines in employment because HMRC has misunderstood the nature of control.”

Kirk concludes: “This situation has been badly managed by the BBC and is spreading both beyond talent used for news and current affairs programmes, and indeed beyond the BBC itself. It may ultimately damage a vibrant and economically valuable sector of the UK economy.”

Published: 27 October 2014

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