The UK parliament’s Digital, Culture, Media and Sport Select committee has been hearing evidence of the scheme put in place by the broadcaster’s management this week in which employees were placed en masse from employment contracts into freelancing arrangements – paid through a limited company or personal service company (PSC).
However, to avoid losing out on collecting national insurance contributions HM Revenue & Customs introduced IR35, which says that if an individual inserts a company between an employee and employer they can ignore it and tax you as if you are an employee.
Commenting on IR35, tax preparation specialist David Redfern, founder of DSR Tax Claims, said the rules around freelance pay “needed to be overhauled before it could be considered to be a fair piece of taxation legislation”.
Redfern argues that the IR35 legislation needed to be completely rethought before its rollout to the private sector, now expected to occur in April 2019.
“The current woes of a large number of BBC presenters as a result of HMRC cracking down on PSC’s are indicative of just how inadequate this legislation is and the fact that there are still over 100 cases to go before HMRC from BBC presenters alone highlights this inadequacy.”
Redfern highlights evidence heard by the committee from the BBC’s Kirsty Lang who described HMRC’s CEST (Check Employment Status for Tax) tool as “not fit for purpose”.
“The very fact that the HMRC’s own tool to help workers to determine their employment status is in itself ineffective is indicative of just what a mess this legislation is,” said Redfern.
“I urge HMRC to revisit this legislation as a matter of urgency prior to it being rolled out across the private sector next April to prevent financial chaos for many thousands of freelancers and contractors.”
James Quarmby, tax and private wealth partner at Law Firm Stephenson Harwood commented: “The boundaries between a freelance contract through a company and an employment contract are not clear and bright. Individuals need to make sure there isn’t mission creep and if they think that is happening they should take advice. Contractors often do switch onto permanent contracts.
“It is easy to criticise the BBC with hindsight but the tax landscape has changed massively in the last few years. However, if they were putting employees into limited companies after the implementation of IR35 then I would say it was poorly advised.”