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?
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.