HMRC blitzes BBC presenters with IR35 tax demands

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Accountants have reported that BBC presenters have recently received PAYE regulation 80 determinations demanding PAYE and NIC from their personal service companies. 

Following the win by Kaye Adams against demands for PAYE and NIC from her personal service company, HMRC has issued similar tax demands to the personal service companies of many freelance BBC presenters who were not already involved in a tax enquiry. HMRC is alleging that the personal service companies did not operate PAYE on deemed salary payments due under the IR35 rules.

The evidence so far points to this being a centrally organised campaign targeting BBC presenters, although HMRC is also enquiring into the tax affairs of freelance TV presenters who have worked for other broadcasters.

What is a regulation 80 determination?

Regulation 80 of the PAYE regulations (SI 2003/2682) allows HMRC to issue a determination (similar to a tax assessment) to an employer in order to enforce payment of PAYE, which should have been operated on pay or deemed pay. A similar notice for employer’s National Insurance Contributions under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999, is normally issued alongside the regulation 80 determination.

The HMRC letters enclosing the regulation 80 notice state that the HMRC inspector has also made a “section 8 decision”, but do not appear to actually issue that decision in order to collect any employers’ NIC due.

Employer compliance review

Every personal service company which has received a regulation 80 notice has also received a letter opening an employer compliance review: ie an enquiry into its operation of PAYE. This begs the question that if the employer compliance review has only just been opened, how can the HMRC officer have already made a decision based on sufficient evidence which has allowed them to issue a regulation 80 determination?

Why now?

All the regulation 80 notice letters seen so far have been dated 1, 2 or 5 April 2019, thus bringing them just inside the four-year window for assessing PAYE for 2014/15. The section 8 decisions need to made within six years of the end of the relevant tax year, so for 2014/15 that would be by 5 April 2021.

Another factor which may have prompted HMRC to act are talks which are ongoing between the BBC and a number of freelance presenters. If the presenter agrees that IR35 does apply to their contract, and reaches a settlement to pay outstanding PAYE and NIC to HMRC, the BBC will ensure that the presenter is not financially disadvantaged by that decision.

However, this promise only applies where the presenter accepts that IR35 applied to their contract for years before 6 April 2017. Where the taxpayer believes that IR35 did not apply they will have to challenge decisions made by HMRC, with the risk that the tax tribunal will agree with HMRC and the tax will be payable, plus interest and penalties.

What to do

If your client has received a regulation 80 determination on the basis that their contract was caught by IR35, the first thing to do is have a frank discussion with that client about risk and costs.

If you and the taxpayer are confident that their contracts are not caught by IR35, you may want to challenge the regulation 80 determination at tax tribunal.

David Kirk, who advises a number of TV presenters, recommends that accountants should consider applying to the tax tribunal for the regulation 80 determination to be overturned, on the grounds that HMRC has not made a discovery which could have led to the reasonable decision that PAYE was underpaid.

HMRC was contacted for comment on the story but declined, citing its duty of confidentiality.

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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18th Apr 2019 17:21

If they come any where near my clients with this sort of drivel, they'd better be ready for a long fight. Both barrels will be fully loaded.

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18th Apr 2019 17:34

They should be thankful this is not 20 years retrospective and that unlike the loan charge victims they are protected by the usual 4 year discovery assessment time limit.

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to Justin Bryant
23rd Apr 2019 11:18

Slight difference between a "loan" never being repaid and someone setting their stall out to minimise their tax liability and then being told "we are going to take your Limited Company status away because we want more money"
I think HMRC will catch a cold on this one, especially when FTT get "same old, same old".

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to johnjenkins
23rd Apr 2019 11:39

Not massively different though.

In one case, we're pretending that the persons income is a loan, whereas in the other we are pretending that their income is actually the income of a make believe entity.

Not too dissimilar in my view.

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to Lone_Wolf
23rd Apr 2019 13:15

Wrong. A limited company is a legal entity in it's own right and not make believe. What is make believe is HMRC's perception of the UK working environment.

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to johnjenkins
23rd Apr 2019 14:11

Only because we all choose to believe in its existence - it is an imagined entity. A company isn't a tangible thing.

You might show me a piece of paper with the company name on it, the buildings it owns and those who work for it, but you're not actually showing me the company. A company is something we've all agreed to imagine together. We're all playing make believe.

Personally, I don't see much different in pretending a company exists to get a lower tax rate, to pretending a loan exists to achieve the same outcome. Both the company and the loan are imagined concepts, existing only in our minds and evidenced by some scribbles on paper.

If a piece of paper in place to say a company exists is enough to lower ones tax rate, then a piece of paper to say a loan exists should also be enough to do likewise.

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to Lone_Wolf
23rd Apr 2019 14:45

a bit like saying a family is an imagined entity? Or a school or a pop group. Just because something is not singularly tangible doesn't mean it is 'imagined'.

A company is a business structure with quantifiable parts that have to comply with Companies House rules - some may be tangible, some may be intangible.

It is the share certificates, the annual accounts, the list of directors/share holders and the company registration number. etc.

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to C Graham
23rd Apr 2019 15:17

Yes - the concept of family, school or a pop group are all imagined entities. You can point at a group of people that you believe meets the requirements of the concept - but it doesn't take away from the fact that they are imagined concepts. (Family may be more tangible granted given that there are physical biological connections).

The fact you mention that parts of a company are intangible sort of backs up my idea that they are imagined. Something tangible, has a physical presence. Something intangible does not. It exists only because we believe it exists.

All the items you list - annual accounts, list of shareholders, registration number - don't make a company any more real.

We could do the same with any imagined concept. God! Possibly the most decisive imagined concept going.

If we all agreed that for God to exist, he would need a certificate with his name and registered number, he'd have to prepare annual accounts and provide a list of directors/angels. If we create the necessary paperwork, then we can all imagine that God exists. Doesn't change the fact that it's still an imagined concept.

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to Lone_Wolf
23rd Apr 2019 15:32

Cogito, ergo sum

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to Lone_Wolf
23rd Apr 2019 15:38

Sorry to disappoint you Lone Wolf but I do have a certificate with name and registered number. I do have to prepare annual accounts and I have angels as directors.

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to johnjenkins
23rd Apr 2019 16:01

All you need now is a significant amount of people to agree that those are enough to make you God and hey presto - you've got a new job.

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to Lone_Wolf
24th Apr 2019 08:51

Would you really call being God a real job? Would God come under IR35 if there was a Limited Company involved? Or perhaps God would be treated like the Queen and be exempt from all taxes.

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to johnjenkins
24th Apr 2019 10:57

I thought HM had opted to pay tax?

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to C Graham
24th Apr 2019 14:47

Would you call "offset" paying tax?

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to johnjenkins
24th Apr 2019 15:13

Imagine she does not do a self-assessment.
Looks like we paid more council tax last year than she did for BP in 2017!
I guess something paid from HM to HMRC could be regarded as offset?
Actually she might fall inside IR35 as unlikely to have a substitution clause. And def gets paid holiday.

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to Lone_Wolf
23rd Apr 2019 16:24

A concept is an idea. Therefore yes a concept is 'imagined'. But once that idea is put into a format that can be recognised, it is no longer 'imagined' and it is no longer a concept.

Important to separate out that for something to exist, it merely requires to be humanly recognisable or identifiable by some accepted characteristic (eg school, pop group) - also can be a mental state like a phobia, or physical state, like cold or tired.

Many things exist without being tangible - they exist in processes, exist in laws, exist in a recognisable structure of operation.

The question with IR35 is whether an employment contract exists - that is the question. And there is some irony in your posts about real v imagined because IR35 appears to imagine there is an employee when reality says that if you look at the process, the structure and what factors would normally identify 'employment', there often is a genuine contractor.

The fact HMRC refer to 'disguised' employment really means 'imagined' employment in many cases. The question of whether there is a 'hypothetical' employment contract disregards the key elements of a standard employee (pension, benefits etc) in favour of those that might in any case be incidental to any provision of service and/OR employment which is therefore biased evidence.

I'm off to the concept of a gym now for an imagined 10 mile run.

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to Lone_Wolf
23rd Apr 2019 14:54

You must be a tax Inspector or Gordon Brown in disguise. Certainly a loan is real, but if it's not repaid, and the purpose of the loan is not to be repaid therefore it becomes tax evasion (not tax avoidance). Setting up a real Limited company to cope with your income and expenses from whatever source now and in the future and paying tax on the profit is normal. (not even tax avoidance). The fact that less tax may be paid is an indirect.

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to johnjenkins
23rd Apr 2019 15:32

Not at all. I have absolutely no qualms with the use of limited company's. Similarly I have no qualms with the use of loans. I'm probably the exact opposite in fact and would use these imagined concepts against HMRC wherever possible.

The point I'm making is that the concept of a loan, and a limited company, are things our society have imagined to make the process of doing business simpler. Neither exists if we didn't come up with their concept. I therefore believe that if either is "created" in the way we have imagined them, then that should be that.

If a limited company is properly formed and engages to do work, then that should be how it is taxed. HMRC shouldn't be able to come in and decide that because they are getting less tax than they'd like to change that arrangement. To unimagine the imagined company if you will - which is essentially what IR35 does. That's not fair.

For society to work we all have to buy into the same concepts, and HMRC trying to change the agreed upon rules to suit themselves is not on.

Similarly for loans. If EBTs and the likes have been documented as loans, then HMRC shouldn't be able to come in and decide they're income instead just because they don't like them (before the 2010 rule change at least). Up until this point there was an agreed concept for a loan and it was agreed that a loan wasn't taxable income. Any loans made until this point should therefore be left as such. Deciding to change this agreed concept and impose tax charges on loans created before this date is unjust in my view.

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to Lone_Wolf
23rd Apr 2019 15:41

Although I see your point, there is a marked difference in a loan not being repaid and a Limited Company.

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19th Apr 2019 09:37

My cynicism based on what I've seen lately tells me that they are hoping firms will get existing contractors to agree to go on payroll, irrespective of actual status, so any tax risk is avoided. And then HMRC will pounce and say "See, you were inside IR35, so pay up."

Then any appeal will start on the back foot. Is the client going to be a useful witness at this point? I doubt it.

Contractors who are thinking of switching to inside should speak to their advisors to protect themselves against frivolous historic claims by HMRC.

Of course, if the contractor doesn't have much money in the company, then the HMRC claim is somewhat pointless. But for those who keep reserve funds they should take advice on how best to ring fence that against unjust attempts to steal it.

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23rd Apr 2019 10:28

playing Devils advocate , if for example a presenter is reading the news and working under the direction of the BBC , in circumstances where they would fairly clearly have been classed as PAYE employed if working directly for the TV company, isn't that classic IR35 ? and if working via a PSC wouldn't that person have been given a "health warning" a long time ago from their advisers that this was a risk . It only surprises me that it has taken so long for HMRC to start targeting these workers. Obviously each case on its merits., and we have seen Christa Ackroyd and Lorraine Kelly , different types of presenters with different outcomes

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23rd Apr 2019 10:35

Concur with D Chaplin - we are seeing firms demand contractors accept deemed inside IR35 for new contracts, with the prospect of all new extensions following the same pattern which will expose the contractor

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to Payroll Pete
23rd Apr 2019 11:26

Simple answer. If said contractors believe they are truly independent contractors then take the financial risk and find a firm that will take on an independent contractor and move on. If they don't they probably ARE disguised employees and should become a full employee.

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to whopkinscom
23rd Apr 2019 13:21

This is where HMRC have done a limited job on what they call "disguised employee". There is no such thing. What HMRC have tried to do is lay down rules and regulations for employment status. In law there are no such rules and regs. only guidelines. So what the working environment is trying to do is fit the Tax rules instead of HMRC fitting what is actually happening in the work place. As I've said before best HMRC keep it's nose out of employment status.

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23rd Apr 2019 13:52

Have mentioned on other posts but surely if found to be disguised 'employment' they can apply for backpaid holiday entitlement, SMP, SPP, SSP, backpaid pension contributions, etc etc as statutory employment law declares the 'employer' must treat all 'employees' with equal status.

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By kjevans
to C Graham
23rd Apr 2019 14:19

In most cases they can't apply for employee benefits as you can be and employee for tax purposes but not be entitled to employee status - that's what's so unfair about IR35. A small Ltd Co is treated as a supplier - no employee-style benefits, no "employment" protection and contract can be terminated with no notice etc ,and yet has to pay tax as an employee AND the Employer's NI and both sets of pension contributions - meaning that they pay more tax than an employee for less benefit - how is that fair?

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to kjevans
23rd Apr 2019 15:10

absolutely - totally unfair and shows that IR35 was always just about HMRC trying to twist the situation and make the little guy trip up and pay - instead of focussing on the mega tax avoiders.
Plus surely all the 'proven' cases must have to then put in an adjusted Corp tax return to reflect a drop in profit plus recover the interest incurred for overpayment held on account? Anyone know if this is the case?

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By IANTO
to kjevans
23rd Apr 2019 15:59

not sure why this post disappeared but here goes again -

I have maintained right from the beginning of IR35 that the claim "employee for tax purposes and not for employee rights" has no basis is law.

I am open to correction if I'm wrong, but I believe that no one who has been judged as a "disguised employee" under IR35 has ever taken their case to the ET, let alone have a different judgement there.

At the risk of howls of protest, I will remind you of my position.

After the ET, and subsequently the EAT had decided that I was not an employee of my client Hewlett Packard,(J.M.Williams v's Hewlett Packard, EAT December 2002, heard by Mr. Justice Elias), I had occasion to slap an FOI request on HMRC, which revealed that they were preparing to investigate me under IR35, but had been advised from a higher level not to do so, as I'd lost my case in the ET.

I still maintain that anyone who so chooses to take an inside IR35 determination to the ET cannot lose. The ET will judge that the individual is either a full employee, a worker, or effectively self employed. Any of these judgements would clearly undermine HMRC's assessment. Note that HMRC settled out of court in the Winchester case as they could not risk a legal determination.

What we need is for a BBC individual who has been judged inside IR35, to do exactly this. Take the determination to the ET. Small fry like myself will not have a huge effect on the landscape.

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By IANTO
23rd Apr 2019 14:27

I have maintained right from the beginning of IR35 that the claim "employee for tax purposes and not for employee rights" has no basis in law.

I am open to correction if I'm wrong, but I believe that no one who has been judged as a "disguised employee" under IR35 has ever taken their case to the ET, let alone have a different judgement there.

At the risk of howls of protest, I will remind you of my position.

After the ET, and subsequently the EAT had decided that I was not an employee of my client Hewlett Packard,(J.M.Williams v's Hewlett Packard, EAT December 2002, heard by Mr. Justice Elias), I had occasion to slap an FOI request on HMRC, which revealed that they were preparing to investigate me under IR35, but had been advised from a higher level not to do so, as I'd lost my case in the ET.

I still maintain that anyone who so chooses to take an inside IR35 determination to the ET cannot lose. The ET will judge that the individual is either a full employee, a worker, or effectively self employed. Any of these judgements would clearly undermine HMRC's assessment. Note that HMRC settled out of court in the Winchester case as they could not risk a legal determination.

What we need is for a BBC individual who has been judged inside IR35, to do exactly this. Take the determination to the ET. Small fry like myself will not have a huge effect on the landscape.

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By jantill
to IANTO
23rd Apr 2019 23:56

Isn't there a timing problem where one must appeal to an ET for a status appeal within 3 months but IR35 cases can start 6 years later i.e. out of time for an ET.

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By IANTO
to jantill
24th Apr 2019 13:43

Yes, you are correct. However, the process does allow for an appeal to be made when a claim is out of time, if there are good reasons for the delay.

Although no one has yet tested this as far as I know, an inside IR35 determination for a contract outside of the 3 months time limit for lodging claims in the ET, would, in my opinion, be a very valid reason for appealing the time limit.

However, it would seem that none of the organisations interested in IR35 issues has approached the ET for their opinion on this, which I find interesting. It may be that the ET would decide on a case by case basis, but it would be good to clarify this issue.

Additionally, because of the change in the rules from April 2020, there could be many challenges by those who previously worked under outside IR35 contracts, who would then be classed as inside. The Winchester case was one example, where the claimant was still engaged by HMRC when the ET claim was made. I can see this happening more often.

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to IANTO
24th Apr 2019 11:41

Presumably also where the 3 month time limit applied, a contractor's so called 'employment' could be deemed to cease when notice is given (ie contract ends) because contractors do not have the same notice period rights as normal employees - (again indication that they are not actually employees).

So therefore, if a contractor had not been given the same notice as other employees of that company, they could take it to an ET to claim unfair dismissal.

If HMRC had later won a case proving they were 'employed', then they could potentially (as above post states) have a valid reason for applying to an ET later than the norm.

ie If they were only determined to be in employment following the conclusion of any successful HMRC legal action, then they would not have been aware of their rights as 'employees'. Simply because they deemed by mutual agreement and their treatment from the contracting party that they were not in fact employees they therefore would not have sought to protect their rights under Employment Law.

Where HMRC had successfully shown there was 'genuine' employment, the said 'employee' should have the automatic legal right to then pursue the contracting party ('employer') for all unpaid benefits backdated to the commencement of the contract.

Fact is companies use contractors precisely because they do not have to pay benefits, holiday, NI etc and can be terminated without risk of ET. Easy come easy go. Serve a defined purpose or specialist need.

The contractor wants the freedom to function autonomously and manage their own services without being under the rules and obligations of an employer.

It all functioned perfectly well before IR35.

IR35 should never apply where there is a specific contract unless that contractor enjoys the same benefits that an employee is legally entitled to.

It should not be fought on 'disguised' employment but 'indistinguishable ' from employment in all areas!

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to C Graham
24th Apr 2019 13:30

I am a sole trader. have even been paid by the BBC at times (but clearly on a self employed basis) so the lack of a limited company in a senses returns us in my case and all other sole traders to the traditional test of employer or self employed (and these days the EU class of "worker" - which is just relevant to various employment protections of which I believe there have been quite a few cases).

If someone instead contracts through a company then the contracts usually say that if there is any extra tax, employee NI etc then the contractor will pay it, I believe. So it might be hard even if within the 3 month time limit to sue for back sick pay etc - I suppose you would have to argue that even though you and your company signed a contract with your client that said the company contracted, you were instead a lying so and so and instead were contracting as an employee even though you had promised on paper you were a limited company and your directors were not employees.

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By IANTO
to EnglishRose
24th Apr 2019 13:50

The object of using the ET wouldn't necessarily be to gain employment rights, but to counter any inside IR35 claim by HMRC.

None of us want employee rights, we just want to work free from the threat of IR35. Given the gross unfairness of IR35, the ET would be an attractive way of countering IR35.

As I've said elsewhere, there might be more opportunities for contractors to test the system after April 2020, because there will be many, just as in the Winchester case, where the client will deem the contractor caught under the new approach, whereas they were not previously.

The main difference then is that many contractors will still be engaged with their clients, so the 3 month rule might not be such a hurdle.

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to EnglishRose
24th Apr 2019 14:22

i think you are referring to freelancing (sole trader) which is a bit diff. Imagine you might work as eg, a stylist on a production, then you would probably be required to show your UTR and confirm you are responsible for your own tax NI etc.

Diff here is where a Ltd Company is the service provider (intermediary) and yet HMRC are trying to show that the situation of the contracted company/contracting party is actually one of employee/employer and that the contract is hypothetically a contract of employment - not services thus insist that payroll costs/NI must apply.

In most cases, the relationship of the contract provider is clearly not employment in 'disguise' because of the way each party treats the situation. However it is HMRC's intention to ignore the red flags (ie no employee benefits/rights under employment law) and pursue the case on minor detail which the appellant then has to prove is not evidence of actual employment.

The cost of that is time and again proven to be a waste of taxpayers money yet HMRC does not seem to learn from the number of cases it has lost that they are treading on thin ice each time they attempt to challenge under IR35

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24th Apr 2019 13:12

Looks like a case of ...........IF AT FIRST YOU DON'T SUCCEED TRY, TRY AND TRY AGAIN
The facts will dictate the outcome of the individual freelancers . But a key issue issue here, as Rebecca points out , is that the Reg 80 notices have just been sent out in time - dated 1st 2nd or 5th April.
Upon what date , I wonder , were the notices actually issued ?
Is this another case of HMRC's inadequate computer system, processed to show specific dates,but not triggered to the actual issue date.

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By Dandan
25th Apr 2019 19:03

Any chance those presenters can get some redress (suing BBC ?)

I recall the case of the presenter who had to find £420k after HMRC investigated her affairs. Apparently , she was told by the BBC that it was the only was that she could work for them. She had to use a service company. They still claim this is a legitimate way to work for the organisation.

This is where one is tempted to equate HMRC to pure evil. That taxpayer would have already spent the money thinking that all the tax liabilities were settled. Even HMRC admitted that she had not cheated or acted dishonestly and yet were eager to bring total destruction and misery to the poor girl's live.

Perhaps time to change HMRC's logo (horns and tail comes to mind)

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