By Martin Kelly
The BBC Trust is coming under pressure to reveal the contents of emails that could show that the corporation knowingly provided its top presenters with an opportunity to avoid paying tax.
According to the Times newspaper, a row is brewing after Anthony Fry, chairman of the BBC Trust’s finance committee, rejected a request from the House of Commons Public Accounts Committee to disclose the internal BBC e-mails.

It is also being reported that Mr Fry, despite being questioned about the emails, has refused to read them.  MPs on the Committee are now demanding the emails be published.

The row follows anger after it emerged that the BBC had been using a system of payment for many top stars and presenters that allowed the stars to avoid paying tax.

The BBC has already admitted that emails contain evidence that the corporation’s own tax advisers were consulted in relation to payments to top earners.  The admission followed an investigation by financial consultants Deloitte, who found evidence that the corporation had taken into account a “range of tax outcomes” for two people who were paid via so called ‘personal service companies’.

In October 2012, newspaper reports claimed that up to 25,000 BBC employees, including 13,000 broadcasters, had escaped paying income tax and national insurance after using a freelance method of payment.  Included in the figure was around 4500 high-earners, including 1,500 ‘on-screen’ presenters, contributors, actors, musicians and commentators, who received payments through the personal service company method.

The revelations that individuals were paid as though they were companies rather than staff brought stinging criticism from the committee of MPs who accused the corporation of being “complicit” in the tax avoidance scheme.

The revelations emerged following a tip off in July after Conservative MP, Daniel Kawczynski revealed he had been contacted by a University friend angry about the practice.

According to Mr Kawczynski, the BBC had ordered freelance staff earning more than £10,000 a year to invoice through a third-party company so the corporation could avoid paying national insurance contributions.

Following the claims, an internal review was held by the BBC which found that there were individuals who were paid as though freelancers but who shared “many characteristics with other individuals who are BBC staff.”  The review also revealed that HMRC would have had no way of knowing if the correct amounts of tax had been paid.

Those involved are thought to contain many high profile newsreaders and presenters from the BBC’s news departments across the UK, including BBC Scotland.

In a response to the review, the BBC Trust said: “The BBC will introduce a more specific employment test to ensure that if an individual clearly displays the characteristics of an employee, he or she will be engaged as staff with tax and National Insurance deducted at source rather than through a service company.”

It added: “As a matter of priority, the new test will be applied to the cases identified by Deloitte where the employment status of an individual looks unclear. If the individual has the characteristics of an employee, the BBC will aim to transfer the individual to an employment contract as soon as contractually practicable.”

However it remains unclear if and when existing contracts will be altered to eliminate the possibility of tax avoidance.  There are also concerns over the implications of non-staff in relation to the BBC’s own charter which covers corporation employees.

Speaking to the Times, Richard Bacon, a Conservative member of the Public Accounts Committee, said that Anthony Fry should read the e-mails immediately and take action on any evidence of impropriety.

“He can’t put his head in the sand on this.  It’s his responsibility to check these things out properly and, if things are not in order, act accordingly.

“The e-mails should also be published because sunlight is the best disinfectant.  Public trust has fallen in the BBC and the best way to restore it is to be open.”


# Marian 2013-01-02 08:36
We have already learned that the Westminster government's propaganda department is an unaccountable law unto itself that harbours serial sexual predators with impunity, and that if we taxpayers dare refuse to pay the licence tax in protest against its bias and largesse ways we may go to prison and earn a criminal record in the process.

Now we learn that not satisfied with paying their self-styled "national treasures" well over the odds by comparison with ITV and SKY, the BBC is now adding insult to injury by actively assisting their coven of nepotists and B list "celebrities" into avoiding paying income tax.

This is yet another example of what is rotten in the state of Britain.
# UpSpake 2013-01-02 08:40
So what if you spend all your worling day within the BBC surely you are an employee especially if you don't moonlight and write articles or 'work' for anyone else. You are, de facto, an employee -surely ?.
Well, its the BBC, an orgainsation largely distant and omnipotent and in fear of its license/tax payers.
Clearly the one organisation they don't fear, HMRC ?.
# Breeks 2013-01-02 09:01
Makes you sick. An organisation funded to the tune of £3.8 billion of tax payers money annually, briefing it's people on how to avoid paying tax and ducking out of National Insurance contributions.

Britannia doesn't rule the waves these days, but Rotten Britannia rules the airwaves.
# rapid 2013-01-02 09:38
There are a few errors with this. freelancers who work through a limited company pay:

Vat, usually at around 11-13% because freelancers can't offset vat deductibles unlike a factory or shop operation.

Corporation tax, which is 21% on revenue (with allowable deductables - again limited in scope for a freelancer)

NI is still paid, it is just paid by the freelance company instead.

Income tax is still paid on earnings and I think there is a smaller tax on dividends.

On top of this, the contracting organisation is not liable for sick pay, holiday pay, death in service benefits, and any other benefits.

Freelancers (in my industry) pay more tax than they did as employees generally because they work harder and earn more. There a few idiots who try to scam but they get caught out.
# gfaetheblock 2013-01-02 10:04
I agree rapid, no redundancy or pensions to be covered as well, which would be a massive liabilities for the BBC. This is common practice in many industries and may well be a net saving for the BBC and the licence fee payers.
# robbo 2013-01-02 10:17
VAT isn't required up to ~70k, after this it can be offset to the company you are contracted with.

Corporate tax is paid on profit not revenue. Dividends incur a double tax both dividend tax and corp tax however, you get tax reductions if you've already paid corp tax on your dividends, thus dividend tax is typically a similar rate to income. The difference is you don't pay NI, neither employees or employers (the big one). You do however pay employers NI on your declared income (salary).

You do save a fair bit on tax, but don't hate the player, hate the game. Tax evasion is wrong, tax avoidance is sensible.
# Dubai_scot 2013-01-02 10:22
I was just about to say the same thing.
NNS should be very aware of how easy it is to "cut and paste" arguments that need further investigation. After all that is a regular feature where the BBC get taken to task over by many authors here on NNS.
# Jonny 2013-01-02 11:26
Not if the "company" is registered in the Cayman Islands. Don't think for a minute that high earners won't be using the same loopholes as Google, Starbucks and everyone else.
# EphemeralDeception 2013-01-02 11:28
Also, the article should make more clear that it is the BBC that is paying less NI(less employees on their books : many contractors instead.) At least that is my understanding.
Can a contractor do the same thing for more than 2 years or have to become an employee? There are ways round this in any case.

What is in the best interest of the taxpayer? The BBC is funded by the license fees + government funding. If they pay more NI and other fees they have to get more funding either centrally or from the license. So it is all swings and roundabouts.

What is worse for me is the obfuscation and lack of accountability. As these top earners are private contracts they are not open to FOI. The top earners can lower their tax by taking a smaller salary from their company eg lower tax bracket and pay themselves dividends at lower tax.

All in all a good situation for the BBC, the top earners at the BBC and for obfuscation. Bad for the basic taxpayer.
# davemsc 2013-01-02 11:59
"According to Mr Kawczynski, the BBC had ordered freelance staff earning more than £10,000 a year to invoice through a third-party company so the corporation could avoid paying national insurance contributions," not the employee/freelancer.
# farrochie 2013-01-02 12:52
If BBC is their only client, then I guess they get caught by IR35, but they are likely to have more than one client, by guest appearances, jobs for other production companies, etc. But they probably get to claim a lot of travel, not paid by the BBC, and which for most of us would be home-to-office.
# clootie 2013-01-02 10:34
Weegie38 - like it! :D

rapid - people don't set up these things unless it gives them a distinct advantage. Tax avoidance schemes don't result in people paying more or "about the same" they give a significant benefit (We have plenty of people doing the same in the Oil Industry too)/ Banking / Medical / Investment Fund Management / etc

What about the BBC Trust. Why have they not intervened on the behalf of those who fund this organisation (and also have to make up the gap in tax revenue). Perhaps it is because the "Trust" is more BBC in identity than an organisation intended to oversee the BBC. The language used by Trust management recently sounded more like an employer than a watch dog.
# rapid 2013-01-02 13:57
The main advantage for creative people is that they can work for different companies. Most employee contracts have exclusivity clauses ensuring that an employee cannot work for another company. Most personalities will earn 20k here and 50k there appearance fees etc on different programmes.

Most BBC programmes are made by production companies.
# Nation Libre 2013-01-02 10:37
Re RAPID. True, unless your company is off-shore, à la Jimmy Carr
# art1001 2013-01-02 11:09
Exactly - we need to know the figures on the PBC accepting/encouraging invoices from offshore companies.
# Davy 2013-01-02 10:37
If the BBC has been advising its top earners on how to avoid paying income tax and NI, then they are nothing more than cheating bastards.

Most of us have no choice in paying our taxes, so why should an organisation financed by our taxes be incouraging its top earning staff to avoid paying their fair share.

I am sick of hearing about people earning far more than the average worker using f-ing tax avoidence schemes to get out of paying their fair share.
# alasdairmac 2013-01-02 11:06
And the NO campaign are still telling us that we will loose this wonderful British institution if we vote YES. Bring it on!
# Rafiki 2013-01-02 11:52
One assumes that these arrangements are entered into at the behest of the "employees" to increase their pay, or is there more to this tale?

Cui bono?
# DonaldMhor 2013-01-02 12:51
John Birt DG from 1992 to 2000 was well known for using this method to receive his vast remunerations from the BBC, as he set about systematically destroying it on the orders of Thatcher the Milk Snatcher. So were many of his hatchet gangs paid by this method. His arrogant and ruthless behaviour included insisting that his driver walked up to his office each day to carry his briefcase for him, whilst the BBC limousine was booked for yellow line parking. Greg Dyke who followed him was paid in this manner also.
# Leswil 2013-01-02 13:05
So the deceitful BBC yet again.
Someone please tell me where the "Trust"
is evident in the "BBC TRUST"

It is a sick joke, but hey we Scots already knew that!
# farrochie 2013-01-02 15:17
Do listen to Alistair Darling's New Year message for Better Together.

"Would we keep the BBC as it is?"

So, we can take it that the unionists intend business as usual for the BBC.
# FREEDOM1 2013-01-02 15:26
I had to close down my IT business because of IR35. To be Freelance you need to have more than one boss(CONTRACT). I was contracting to one boss at a time and the government introduced IR35 to stop this practice. I hope these BBC freelancers have other means of income to be able to opt out of IR35? If not then how do they get away with it. I lost my house etc as I was too old to get normal employment.
# farrochie 2013-01-02 15:44
Likewise, IR35 cost me a lot when it was introduced and no way I could increase my day rate to compensate, so I went back to staff in an oil company.
# robbo 2013-01-02 16:02
IR35 has nothing to do with the amount of contracts you have.

It's is to do with the nature of the agreements you have in place with your client(s).
# Skip_NC 2013-01-02 17:30
It is a long time since I was a PAYE Auditor, but this article brings back memories.

As others have noted, the so-called IR35 negates any tax benefit for many BBC workers. The behind-camera workers make a living wage (perhaps) yet are stuck with punitive taxation. It is the "stars" and the BBC who stand to benefit. The latter because they don't pay NIC and the former because they can afford to set up avoidance schemes.

This article needs further research. Of course, I do not expect things to be so clear-cut, but if there is an e-mail in existence that confirms "According to Mr Kawczynski, the BBC had ordered freelance staff earning more than £10,000 a year to invoice through a third-party company so the corporation could avoid paying national insurance contributions," we could very easily be looking at criminal acts rather than the simple negligence that most employers are penalised for when audited by HMRC.
# soutron 2013-01-02 18:35
Slightly O/T but just got an e petition put up regarding the BBC's referendum coverage. If anyone wants to sign it you can view it here:

I realise it'll probably do nothing to change the situation, but hey, can but try!
# MAcandroid 2013-01-03 09:59
# Barontorc 2013-01-03 02:58
There are tax-wise comments made here that I would not dispute as being accurate. What I find irritating is the notion that this public funded body is setting about to minimise its contribution back into the public purse. It's quite a perverse and irresponsible thing to do.

Errant tax payers are one thing, but these structured schemes that reduce income to the country are founded on the same attitudinal principle, avoidance of dues.

If this is another like MP's expenses scam coming from a public funded body they should have the book tossed at them and if the supposed regulatory authorities are not interested then TV licence fee payment should be held back.

Heid's buttoning up the back - comes to mind!
# gus1940 2013-01-03 10:18

Are we not owed an explanation of how the company set up by Brown & Spouse to receive all income from world wide speech making and other extra-Westminster income works?

He has stated that they do not profit personally from said earnings and that these are swallowed up 100% by staff and other 'expenses'.

Following that logic all MP's should form companies to handle their staff and other expenses.

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