'Tax dodge' contracts for hundreds of BBC Northern Ireland staff
Corporation in a corner: tax revelations add to woes as abuse scandal escalates
BBC Northern Ireland has been handing out hundreds of contracts that could help its workers pay less tax, it can be revealed.
In dozens of cases staff were paid via private companies, which can reduce their tax bills and save the broadcaster from making National Insurance contributions.
The practice has previously been described as a legal tax dodge.
Around 260 Belfast-based workers were paid off the books in the last year, some of whom earned over £50,000 during that period.
However, the figure could be much higher as the BBC have refused to say how many of its on-screen talent were on these contracts.
Earlier this month a report by Parliament’s Public Accounts Committee said the off-the-books arrangements created “suspicions of complicity in tax avoidance”.
DUP MP Gregory Campbell said he was concerned by the issue, and described the practice of paying staff through private companies as “staggeringly inappropriate”.
However, the BBC said it complied with HMRC requirements with all its contractual arrangements.
The figures were revealed after a Belfast Telegraph investigation into tax affairs at BBC NI.
The broadcaster employs around 650 people in Northern Ireland who are involved in production, technology and business and support.
During 2011/12 262 of staff employed on a freelance basis did not pay tax or national insurance at source, the broadcaster said.
Three of these earned more than £50,000.
These included 51 engaged via personal service companies — an arrangement which allows workers to substantially limit tax liabilities. One earned over £50,000, the BBC confirmed.
The figures only relate to backroom staff.
It is known, however, that across the UK 1,500 top BBC television and radio stars are employed via service companies.
A third of the BBC’s 467 presenters are also known to be paid off the books.
Mr Campbell, who had been seeking answers on the number of Northern Ireland staff paid off-payroll and through service companies, said he was shocked by the figures.
“The BBC’s record on this issue is not one which enhances an already damaged reputation,” he told the Belfast Telegraph.
“Given that the BBC is reporting on stories, even in recent days, about companies such as Starbucks who have avoided huge tax bills there is a need to know whether the people asking questions of others are actually involved in a similar practice themselves.”
Earlier this month, a scathing report from Westminster’s Public Accounts Committee claimed the BBC could be “complicit” in tax avoidance by allowing workers to be paid as if they were companies rather than individual staff.
The BBC said all off-payroll contracts stipulate that staff are required to pay the appropriate amount of tax. However, the PAC said the corporation had no idea if they were paying their taxes properly.
A BBC spokesperson said: “The BBC pays all its full-time staff with tax deducted at source in the normal way and this includes all senior managers.
“We also work with freelancers, such as camera crews, make-up artists, actors, singers and presenters, many of whom work for a number of other employers.
“All our freelancers are paid in accordance with HMRC guidelines and we stipulate in our contracts that the appropriate amount of tax must be paid on any BBC earnings.
“None of our processes is designed to reduce the amount of tax paid by the BBC or by the freelancers themselves.
“In line with HMRC guidelines, certain freelancers are paid through service companies. It is the BBC’s preferred option for freelancers paid more than £10,000 a year and in many cases it will be the only option available to them if they work at the BBC.
“It is in no way designed to reduce the tax they pay. We submit an annual report on all our freelance payments to the HMRC, who have the ultimate responsibility to ensure freelancers are paying the correct amount of tax on all their earnings.
“Nevertheless, the BBC has launched an independent review of all such arrangements. If we feel it is right to make any changes as a result of this review we will do so.”
A controversial employment practice... the key questions
Q What is the controversy all about?
A The BBC has admitted handing out 25,000 contracts a year across the UK where a worker’s pay is not taxed at source. It includes 13,000 contracts for people who appear on TV and radio — what the trade calls on-air talent. Around 3,000 contracts are paid via personal service companies, potentially allowing workers to limit their tax liabilities. Westminster’s Public Accounts Committee said the extent of off-payroll contracts — where workers must make their own tax and national insurance payments — was “shocking”. Margaret Hodge, who chairs the PAC, said off the books arrangements create “suspicions of complicity in tax avoidance”.
Q What is the situation in Northern Ireland?
A Last year BBC NI issued off-payroll contracts to 262 workers. These included 51 staff paid through personal service companies. However, these figures relate only to the broadcaster’s backroom staff and do not include on-screen talent. The numbers contained in the PAC report, which include talent, were provided to the committee by the broadcaster. The Belfast Telegraph obtained Northern Ireland tax details through a Freedom of Information request. Information relating to on-air talent does not have to be disclosed under FoI.
Q So what are personal service companies, and why are they controversial?
A Being paid through a personal service company, rather than Pay As You Earn (PAYE), allows the recipient to pay corporation tax of 21% on their firm’s earnings, instead of income tax of up to 50% — thus saving thousands of pounds each year. Since corporation tax is paid on profits, expenses such as travel and subsistence can be deducted before tax is applied. The BBC also avoids paying National Insurance contributions of 13.8%. It is estimated that an employee on a £100,000 salary and the PAYE scheme would take home around £64,000, compared to £71,000 for those who had set up their own personal service company.
Q Sounds controversial. Are these ‘companies’ legal?
A Yes. The BBC has done nothing wrong. Nor is it alone in paying employees this way. Earlier this year it emerged up to 2,000 senior civil servants are channelling their pay through private companies and agencies. The practice is also common in the private sector, particularly in high-paid professions such as banking, finance and IT. Around 600,000 one-man companies are in operation. The vast majority are legitimate. Indeed last year just 23 uses of service companies were challenged by HMRC.
Q Who is using personal service companies?
A The BBC did not name employees who use private companies to the PAC, however, it is widely reported that Newsnight presenter Jeremy Paxman is among them. Mr Paxman claimed he had to be paid this way if he wanted to continue to front the programme. Newsreaders Fiona Bruce, Joanne Gosling, Emily Maitlis, Gavin Esler and Sophie Raworth, and radio broadcaster Chris Evans are also said to be paid in this fashion.
Q What has the government said on the matter?
A Labour MP Margaret Hodge, who chairs the Public Accounts Committee, said the practice of paying people through private service companies was “staggeringly inappropriate”. She added: “I want the BBC to stop and call a halt to what is completely unacceptable use of tax avoidance schemes.” DUP MP Gregory Campbell has also added his voice to the criticism. He also wants BBC Northern Ireland to state how many of its talent are paid off the books or through private companies.
Q And what does the BBC say?
A The broadcaster said it is common practice within the broadcasting industry for people to work on a freelance or self-employed basis. It said many do not work exclusively for the BBC. “These individuals are responsible to HMRC for their own tax and National Insurance payments although we stipulate in all contracts that they are required to pay the appropriate amount of tax in accordance with HMRC guidelines.”