Why a Celebrity Tax Investigation Has the BBC Seeing Stars

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You may have already seen the headlines. Somewhere around a hundred BBC presenters are currently gazing down the barrel of a nasty HMRC false self-employment investigation. It’s not limited to the one corporation, either. Other broadcasters are falling under the same uncomfortable spotlight, and could soon be facing the same music.

The rules around false self-employment catch a lot of people out, and can have painful consequences if you’re on the wrong side of them. Personal Service Companies, such as the ones being investigated at the BBC right now, aren’t the one-size-fits-all tax solution many seem to believe. Simply put, you don’t get to choose what your employment status is. HMRC will give their opinion but if a decision is needed on IR35 it will ultimately be made by the tax tribunal . You can’t just expect to fly under the taxman’s radar. If they’re found to have been avoiding taxes and National Insurance contributions, the “BBC 100” could be looking at some pretty agonising backdated tax bills.

Some, like the newsreaders Tim Willcox and Joanna Gosling, are apparently already appealing the HMRC rulings in their cases, while the BBC itself seems to be intent on demonstrating that its own hands are clean, announcing on their website that it’s “up to individuals to ensure they pay the right tax.”

The BBC also pointed out that this is going to be a industry-wide issue, in that it’s setting the precedent for how freelance presenters operating through Personal Service Companies are handled in the entertainment business. That fact alone is going to have a lot of people sitting up and paying attention.

As for the view from RIFT Legal Services, here’s our take on the situation. Naturally enough, a lot of it comes down to the notorious and often poorly understood IR35 rules. This so-called “intermediaries legislation” was brought in to combat a specific kind of dance that HMRC felt some freelancers were doing around the tax laws. In essence, the taxman was afraid that people were quitting their full-time jobs on a Friday, reorganising over the weekend into a Personal Service Company and setting back up at their old desk on Monday morning. Nothing had changed in their working arrangements, but they were suddenly able to do tax-efficient things like pay themselves a modest salary but make up for it through dividends.

The IR35 legislation essentially knocks the Limited Company intermediary out of the employment chain. If a freelancer is found to be working as if permanently employed, then IR35 kicks in and things get ugly.
There’s an additional wrinkle to watch out for, too. IR35 isn’t the only rule the taxman uses to keep track of employment status in the entertainment industry. The Categorisation of Earners Regulations 1978 has been used to probe the industry in the past, and could well come into play again. Under these rules, it’s possible to be classed as self-employed for tax purposes in entertainment, while still considered an employee for National Insurance.

The bottom line, as always, remains that you need to be absolutely sure you understand what your employment status is. There are perfectly legitimate reasons for setting up a PSC or working through an intermediary. However, if your primary goal is to avoid taxes and National Insurance contributions, while continuing to enjoy many of the advantages of normal employment, then you could be lining up trouble for yourself.

It’s often a tricky balance to strike, which is why RIFT Legal Services work so hard to resolve IR35 problems for our clients. In fact, we go so far as to guarantee protection. We defend against HMRC challenges, and pay the liabilities ourselves if the taxman digs his heels in. We’re proud to stand by our clients, and committed to taking care of business.