The taxman’s treatment of the self-employed has been thrust into the spotlight again as a former BBC presenter has been told to pay back hundreds of thousands of pounds to HMRC.
Former Look North host Christa Ackroyd has lost a court battle for backdated tax against HMRC over her use of a so-called personal service company contract.
The structures, which are used by a number of high-profile media and sporting figures, allow the individual to retain a self-employed status through a limited company, receiving their salary off the other company’s payroll and so pay less tax.
HMRC first demanded unpaid tax in 2013, the Guardian reports, arguing that Ackroyd was in fact a full employee of the BBC.
Ackroyd’s appeal over the £419,151 demand has now been ruled unsuccessful. The presenter, among others at the BBC, said that she had set up the arrangement at the request of the organisation.
While the tribunal finding cannot set precedent, this is the first successful case of its kind from HMRC in the last seven years, according to the Guardian.
An HMRC spokesman said: “Employment status is never a matter of choice…It is always dictated by the facts and when the wrong tax is being paid we put things right.”
A BBC spokesman says: “The BBC was not party to this case, and as was standard industry practice at the time the individual was engaged as a freelancer in 2001 and paid via their existing company. Until last year it was for individuals with service companies rather than those engaging them to determine their status for tax purposes.
“The use of personal service companies is entirely legitimate and common practice across the industry as it provides flexibility for both individuals and organisations. An independent review conducted in 2012 found that there was no evidence that the BBC had attempted to avoid income tax or national insurance contributions by contracting in this way.”
Andy Chamberlain, IPSE, the Association of Independent Professionals and the Self Employed Deputy Director Policy, commented: “This case is significant for several reasons: it’s the first IR35 ruling for seven years, it has resulted in an extremely large tax bill for an individual, and it shows that the original IR35 legislation, deeply flawed though it is, can be made to work when HMRC actually enforce it.
“The current drive to push all the liability onto the client from the outset is like using a sledgehammer to crack a nut. Last year’s change to the way IR35 works in the public sector has essentially stopped contracting in the sector altogether, robbing it of vital specialist skills and damaging public services. If the Government extends the reforms to the private sector, as it has signalled it wants to, it will damage not only our flexible labour market, but the UK economy as a whole.”
IPSE understands there are several other BBC engagements under investigation, though it remains to be seen whether they will contain the same characteristics as this one.
