THE BBC is on a collision course with its stars as it prepares to force them to change their freelance tax arrangements and join the corporation’s staff.
More than 100 presenters and entertainers are to be paid as staff rather than freelancers from October. They may include Jeremy Paxman, who hosts Newsnight, and Fiona Bruce, the newsreader and presenter of Antiques Roadshow.
The BBC has decided to treat them as new starters even if they have worked for the corporation for many years. This means their entitlement to redundancy pay, pensions and other staff benefits will be hit.
Journalists and off-screen workers such as lighting technicians who are forced to join the staff will also be subject to the same contractual arrangements as new starters.
The corporation has been forced to change the way it pays its biggest names because of a parliamentary report that disclosed it was paying 1,500 presenters, musicians and actors through private companies. It also paid 4,500 contributors through personal service companies.
Margaret Hodge, who chairs the Commons public accounts committee, said paying regular contributors through service companies gave rise to “suspicions of complicity in tax avoidance”. Individuals can pay corporation tax of 20% or 23% depending on their salary level, rather than income tax of up to 45%. The BBC can avoid paying national insurance at 13.8%.
This weekend the BBC said it would ensure that contributors’ take-home pay is not affected when it unravels these arrangements.
It said: “They will be paid comparable rates adjusted only to reflect that the BBC will be paying the tax and national insurance contributions that were previously their responsibility. This should not incur a cost to the BBC nor affect these individuals’ take-home pay.”
The BBC sent new guidelines to unions on August 2, explaining that it would impose a new test for people to demonstrate that they are self-employed. From October, everybody will have to work on PAYE unless they meet one of three conditions: have a Lorimer letter from Her Majesty’s Revenue & Customs (HMRC) to prove their status; pass the HMRC test or have a role that appears on the “modus operandi”, a Revenue list of broadcasting jobs typically performed by freelancers.
Some presenters paid through personal service companies feel aggrieved at the implication that they have saved tax by doing so or that they had a choice. Paxman wrote in a letter to The Times that the BBC “required me to form a company if I wanted to continue to present Newsnight”. Informed sources say he has paid as much tax since he was paid through his own company as he did when he was paid as a freelancer.
The BBC said: “Independent auditors have made clear there is no evidence that the BBC advocated the use of personal service companies to avoid tax nor that staff were forced onto service company arrangements. Many of our off-air freelancers are likely to continue to be hired through their service company.”