A recent article in the Sunday Times reported that many of the BBC’s highest paid presenters have set up service companies apparently at the advice of the BBC itself. A number of presenters have been persuaded to accept freelance deals by the allure of being able to negotiate higher pay in return for sacrificing employment rights; none more so than that of membership of the BBC’s pension scheme.
One household name was warned that seeking full time employment as opposed to freelancing would result in a 40% pay cut!
The BBC’s powers of persuasion were supposedly driven by HMRC’s recommendations that presenters of the likes of Jeremy Paxman, who is essentially an employee, should either be employed or made to form their own service company to trade directly with the BBC. The assumption must be therefore that these people were operating as self-employed prior to HMRC’s intervention.
Such collaboration between BBC and presenter allows the BBC to escape the 12.8% employers NIC burden and the presenter to so arrange their tax affairs to lessen the impact of the imminent higher rate tax charge of 50%.
The hall of freelancer fame currently includes:
¨ Emily Maitlis and Gavin Esler (Newsnight hosts);
¨ Sophie Raworth (One O’Clock News reader);
¨ Sarah Montague (presenter of Radio 4′s Today programme);
¨ Jeremy Vine (Radio 2 host)
¨ Fiona Bruce;
¨ James Naughtie;
¨ Jeremy Paxman;
¨ Fearne Cotton;
¨ Chris Moyles;
¨ Declan Curry;
¨ Adrian Chiles
Obviously, setting up a personal services company enables freelancers and contractors to operate in a very tax efficient way. However, those contractors that have just started to trade in this way are unlikely to qualify for a normal mortgage, unless they qualify for a contractor mortgage. A number of mortgage specialists providing financial advice to contractors have managed to persuade a number of banks to simplify their underwriting criteria with regards to what qualifies as relevant earnings for contractors.
Contractors who are unable to provide 3 years accounts will be delighted to learn that there are lenders providing contractor mortgages based on assessing contract annual earnings alone.
Some presenters, however, still remain on the corporation’s payroll, such as Huw Edwards (Ten O’Clock News presenter), Nick Robinson (political editor) and Evan Davis (Today presenter).
BBC news and current affairs presenters are subject to restrictive working practices and many are prohibited for working for broadcasting rivals, writing for the press or paid speaking due to conflicts of impartiality, thus making the working relationship quite exclusive.
Given the nature of presenting tv and radio programmes, it would be safe to assume that presenters are subject to a fair degree of control and substitution would be unlikely. Are these presenters therefore genuinely self-employed and running a bona fide business? If HMRC have laid the trap then will they ensnare these presenters with IR35? Watch this space for future installments!
This article was provided by Qdos Consulting, the UK’s leading authority on IR35 status issues and to date has won over 1,300 disputes against HM Revenue & Customs, resulting in tax savings of over £36m for our clients.
