BBC contracts raise 'suspicions of complicity in tax avoidance'

Oct 5, 2012

Public broadcaster admits 4,500 individuals are paid through companies, allowing them to reduce tax contributions

THE BBC has been singled out for criticism by MPs investigating the tax arrangements of public sector workers. The broadcaster and other employers have been accused of using a system to pay staff "which generates suspicions of complicity in tax avoidance".

The Public Accounts Committee found that the BBC has issued 25,000 so-called "off-payroll" contracts, under which tax is not deducted at source. 13,000 of these contracts are for people who appear on our screens. Reports suggest they include Newsnight presenter Jeremy Paxman and Antiques Road Show presenter Fiona Bruce.

The BBC admitted last night that 4,500 contributors were paid through personal service companies, including 1,500 who appear on camera such as presenters and actors.

Employees on such contracts are not paid through the BBC payroll, but rather through companies set up in their name. The Daily Telegraph explains that this arrangement "allows the recipient to pay corporation tax of 21 per cent on their firm's earnings, rather than income tax of up to 50 per cent, saving thousands of pounds a year". The paper notes that the system also allows the BBC to avoid paying National Insurance contributions for these employees.

Paxman has previously insisted he was "required" by the BBC to form a company, the Daily Mail reports. He said the corporation "claimed it had been told to do so" by the taxman. Bruce also said she was forced to be paid through a company.

The Chairman of the Public Accounts Committee, Labour MP Margaret Hodge said: "Avoiding tax and national insurance arrangements when paying public sector staff is almost always staggeringly inappropriate.

"The public sector must maintain the highest standards of propriety in its employment practices if it is to show leadership in the fight against tax avoidance.

"It must avoid the practice of using off-payroll arrangements for staff - which generates suspicions of complicity in tax avoidance and which fails to meet the standards expected of public officials. "Those whose income is derived from monies raised through taxation have a particular obligation to make sure that they do not use tax avoidance schemes."

The BBC said: "We note the conclusions of the PAC report and will respond to the points raised as part of our detailed review of tax arrangements."

But the corporation pointed out that the actual number of people being paid off-payroll was less than it looked: "In many cases an individual - such as an occasional contributor to programmes - could be issued with a contract each time he or she is booked to appear."

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"allows the recipient to pay corporation tax of 21 per cent on their
firm's earnings, rather than income tax of up to 50 per cent, saving
thousands of pounds a year". This is nonsense: The company pays 21% corporation tax, then the individual either takes the money out of the company as salary, in which case they will be taxed on the income just like anyone else (so are WORSE off) or they can take it as a dividend (in which case the corporation tax is offset against the individual's tax liability, but the individual still has to pay the 40% or 50% net tax they owe. The only benefit comes if the individual minimizes their salary so minimizes personal NI...their company STILL has to pay flat rate Company NI, so any benefit is minimal. If you are going to write reports on complex tax issues, at least have to good grace to talk to a tax expert and GET IT RIGHT

...worm out of that one, Paxman - your are the FIRST to pass comment and judgement on people whose actions you do not agree with - time for some humility from you (fat chance, I fear)