National Audit Office publish report describing BBC’s freelancer IR35 nightmare

• Several BBC presenters are under investigation as they were deemed to be employees of the BBC under IR35 and face large tax liabilities
• The BBC originally classed the majority of its freelancers as self employed but changed their decision when IR35 public sector changes came into force from April 2017
• The BBC’s first use of the CEST tool produced a result of ‘unable to determine’ employment status result in half of their cases
• Following discussions with HMRC, the BBC used the CEST tool again and 92% of freelancers received an ‘employed for tax purposes’ determination
• BBC presenters believe they were forced into Personal Service Companies (‘PSCs’) therefore the BBC should take some of the blame

Aspire Comment

The report from the National Audit Office explains in detail the extent of the mess that the BBC has created for themselves and their presenters in IR35 tax legislation. In May 2018, the BBC estimated that approximately 300 presenters were hired through PSCs and so, were at risk of being challenged by HMRC. All open cases relate to tax years prior to 2017 and the vast majority of these were opened prior to the off-payroll reform, therefore any liabilities for not applying IR35 where HMRC believe it did apply, should sit with the presenters as opposed to the BBC. If the presenters were forced down the PSC route historically by the BBC then you can see why the BBC may be facing some backlash.

However, since April 2017, if you are the end client in a labour supply chain within the public sector, the responsibility of determining whether IR35 is your responsibility, if you do not make the determination then any potential liability will be passed to you.

The report validates widespread concern regarding the CEST tool as the result of the tool changes dramatically depending on who is inputting the information. Many believe the tool is unreliable on the basis that it is HMRC’s interpretation of the legislation and HMRC have lost many Tribunal cases in relation to IR35 in recent months, whilst upholding their stance and not amending any guidance or the CEST tool as a result.

It is clear that there are still problems to be dealt with from the public sector implementation of IR35 off payroll rules, so why are Government extending a flawed system to the private sector in April 2020? We await this consultation in relation to the extension into the private sector.

To view the report click here.