IR35 and celebrities: Big bucks contracting

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Andy Vessey considers how much longer celebrities can avoid the IR35 trap door.

Many of TV's highest paid presenters are being remunerated via personal service companies, according to a Sunday Times report published last year, but where do they stand when it comes to IR35? The report detailed the earnings of several high profile BBC presenters who had opted to go down the freelancer route, reportedly following advice from the BBC and the enticement of greater riches.

Employment status is not simply a matter of choice but involves examining the facts of an engagement as HMRC continually remind us; so who came up with this brainwave? Apparently, it was HMRC itself when it supposedly recommended that the likes of Jeremy Paxman should either be employed or forced to for...

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28th May 2010 09:55

we don't know

When IR35 was introduced, it was BBC and media people working through companies who were instanced as a significant part of the problem. One might therefore suppose that HMRC is alert to this and may well have taken action !

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By dstickl
to Ruddles
15th May 2012 08:41

@oldersimon:Correct, it was BBC abuse flaunted need for IR35 ...

oldersimon wrote:

When IR35 was introduced, it was BBC and media people working through companies who were instanced as a significant part of the problem. One might therefore suppose that HMRC is alert to this and may well have taken action !

Hi oldersimon!   You are correct, of course, IMO (in my opinion) it was the BBC alleged high level abuse as flaunted by alleged Deputy Director-General John Birt's alleged 1991 company's accounts [e.g. for John Birt Productions Limited, etc] that triggered a need for IR35, here's a link:-  

http://www.independent.co.uk/news/bbc-helps-its-chief-to-avoid-tax-exclusive-birts-salary-paid-to-his-private-company-1475816.html

AND IMO, one of the apparent "in jokes" of a recent (i.e. in Spring 2012) BBC2TV Newsnight programme, was that "Paxo's" programme "guests" seemed to me to pussy[***] foot around the matter of "Paxo's" alleged PSC alleged tax alleged arrangements. 

QUESTIONS:

* Are some BBC TV programmes suffering from self-interested self censorship? 

* Is this an example of one of the "forces of stagnation" that GO spoke about at the FSB in early 2012?

* Is the lesson of this partial hidden-ness (as compared with open-ness) that IR35 can only be properly dealt with in a marginalising 'salami slicing' type  "discriminatory" approach that the proposed screen of the 12 business entity tests [set out in HMRC’s 47-page intermediaries legislation guidance note] could provide, i.e. that the proposed test(s) should:  

(1) Cut out the undesirable abuses perpetrated by IR35 - such as catching OAPs (who have to work out of relative poverty) in its incomprehensible net - while

(2) Allow IR35 to still catch gross misbehaviour, e.g. the "Friday-to-Monday" syndrome, etc?

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By Homshaw
28th May 2010 10:51

IR35

Thought the Conservatives were going to scrap IR35. The PCG website suggests so

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By Anonymous
28th May 2010 10:55

CELEBS V IR35

I to have freelanced as an accountant but have provided my own equipment,books etc as well as losing fees for some work, paying the company I was working for for client's penalties it had suffered as well as going out to see it's clients and working at home. I have always had a foolproof contract that sets out all issues and have my own computer and software.

I find that these high paid celebs are fully breaking the rules and thus putting the likes of myself in a position of jeopardy. I think they should play ball in the current economic climate and be made to pay their fair dues. When a lot of them are reporting on the current economic climate and political situation it surely makes them hypocrits.

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By Anonymous
28th May 2010 10:56

Not quite as cut and dried as you might think

I'm sure that there are some badly constructed arrangements out there which may be vulnerable, but I don't think the position is as cut and dried as it might seem .

Certainly the star's appearance under the cameras may be fixed and personal, but (depending on role) it can be a tiny proportion of the off camera time involved to get the show out.  Usually a performer has to have some involvement in the off camera work but much is/can be delegated.

It can be helpful to get the performer to talk through their off camera routine and explain everything he/ she and their team does -it's certainly been an eye opener for me as well as helping justify self employed status or tactfully head off problem cases.

 

 

 

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By Anonymous
28th May 2010 11:09

Abolish or reduce NI

The obvious solution to all the problems we face regarding IR35/False self employment etc is either to reduce NI to a nominal figure, say 2% or 3% or to abolish it all together.

Income tax rates and Corporation tax rates could be increased to compensate. Pensioners, who don't pay NI and would be the biggest losers, could have the age related personal allowances increased significantly and reduced, over a greater range than at present, to the level of the basic allowance as income increases so that only the better off would pay more.

I don't see anything wrong in a pensioner earning £40,000 plus having to contribute a bit more and the likes of Fred Goodwin on a pension of £500,000 can make a bigger contribution.

We need to simplify the tax system and get away from a system where carefully worded contracts and long drawn out legal battles are the only way to determine the correct amount of tax to pay. This would leave much more choice in the manner in which people can arrange their affairs and take on work without hurting the treasury. It would also mean that only employers making profit would pay tax rather than employers who take on workers.

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28th May 2010 11:18

Hold the horses

-- Ian McDonald IML Interim Management Ltd Finance~Accounting~Systems http://www.i-m-l.org

Hold on guys - who's to say they are not applying the rules of IR35 and taking a large salary with little or no dividends from their service company!

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By Anonymous
28th May 2010 12:47

IR35

How about charging NIC on close company dividends.  That could solve the IR35 problem, Arctic Systems, equalise the tax/NIC burden across all taxpayers and raise funds to reduce the deficit.

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28th May 2010 13:46

thats right take everyone elses money

UK has one of the most distributive tax regimes in the world - the moderatley high earner pays enough direct tax already , a move to a tax on consumption is better. higher tax rates do not as a rule result in a higher yield, its simply envy taxation - however i support the abolishment of child trust funds and would like to seeing a large scaling back in the tax credit system especially where one partner ha income over £40k

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28th May 2010 14:04

Front of Camera

It is not true to say that presenters are ignored by the Film and TV Units - they can qualify for self-employed status where they are "performers" - and the likes of Paxman et al would certainly qualify for that status as they bring their own personality into their appearance, whether you like them or not, and certainly does when they appear on quiz programmes and the like.  The position of a newreader is less clear but most probably qualify as performers, certainly the headliners, although I suspect continuity announcers might have more difficulty excpt for the ubiquitous Alan Deddicoat!  Where a presenter/personality IS employed by the Beeb they always used to be employed as a grade described as Producers.  So, no mystery at all and a misdirected article as evidenced by the comments made.

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By tabrop
28th May 2010 14:38

Hello Kettle, meet Mr Pot

Oh the joys of watching the Paxmans of this world putting the boot in on Lord whoever and their non dom status!!!!

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By Anonymous
28th May 2010 16:42

Tax on celebrities. Unlikely

 Cop out by HMRC!

The could have said;

"Thank you for your enquiry. We at HMRC apply tax legislation equally and fairly to all, irrespective of their standing. In the event that any presenter at the BBC falls within the IR35 rules, we would apply these. You will understand that we cannot comment on any specific tax payers tax affairs"

At least we would have some comfort that HMRC does apply the same rules to all.

From their reply and the recent events regarding the parliamentarians and their abused freebies I am left with the impression there are two types of taxpayers. Those HMRC can squeeze till they bleed and the "important" (sic) people who provided they keep a low tax profile can get away with murder.

But then I am a cynic.

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By Anonymous
28th May 2010 16:51

IR35 applicable

 Apply these additional rules (ex another tax jurisdiction with same problem) and clarity should follow:

1. Do you earn 80%+ from one client -= yes employee

2. Registered for PAYE - No then employee

3. Registered for VAT - if over the threshold and no then employee

4. Do you employ 2 or more people. Yes then unlikely employee

5. Do you perform the work at the client using all the client's facilities - yes employee

These would be in addition to substitution and who controls the work/attendance.

 

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By Anonymous
28th May 2010 17:55

IR35

It's baffling that the Labour Government never did enough to stop the avoidance of NI by those behind small limited companies, including IR35 type ones.

 

 

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28th May 2010 18:14

get a grip!

 Questions

do you get 80% of income from one client: yes=employee.registered for PAYE: no=employeeover VAT threshold and not registered: no=employee

1) Over what period?  Over a month?  A year?  A quarter?  I may well get 80% from a single client over a short term, but so may a small engineering company, or even an accountant

2) If only it were that easy.  If you're running a so-called "service company" you will be registered for PAYE and NIC.  Very few contractors are "self-employed" in the technical sense.

3) Over VAT threshold and not registered does not make you an employee- it makes you a criminal.  Just because you are taxed as though you were an employee, doesn't mean they don't want the VAT as well.

"Anonymous" is obviously a PAYE employee and doesn't see why others should pay less tax.

News for you: I don't.  I actually contribute more to the Exchequer than a permie doing a similar job, and cost them less.  It's a common misconception that if a contractor goes permie they just multiply his weekly rate by 52 to get a salary: 25 would be nearer, as they will suddenly have a whole new bunch of overheads.  

 

 

 

 

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28th May 2010 18:20

I'd vote for that.

 I'd vote for that, at a pinch: it would give some clarity to the situation, and would mean I can still save for a rainy day, or put money into new ventures- the problem with IR35 is that, if "caught", you are taxed as though 95% of the company's billings are gross salary - whether you actually take it or not.

I'd cope with a situation where all money drawn from the company is taxed the same way.  It's the threat of being taxed on money I've not taken that galls.  Of course, I'd then want to be able to sign on, any week where I don't have a contract (e.g. seven of the last nine years).  And I'd like sick pay, and holiday pay, and redundancy when a contract is not renewed...

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28th May 2010 18:29

Level playing field wanted.

Why is it, if I make and sell widgets, even if I sell every widget I make to say, Tesco, I can happily pay myself minimum wage and take the rest as divvies, and the taxman will nod approvingly?

Yet have the same arrangement in a services industry, and suddenly I'm a tax-dodger.  I'm in the same boat as the widget-maker, financially: lose the contract and I'm unable to get any benefits unless I close my company or it goes into receivership.

Don't kid yourselves about IR35: it's a poor solution to the wrong problem.  Remember the rhetoric: it was all about the "Friday to Monday" scenario- poor downtrodden workers being forced into self-employment to save NIC for their employers.  But then the CBI and various industry bodies kicked back, and the big consultancies had a word (remind me, who did "Red" Dawn work for?) - and the onus shifted from the "deemed" employer to the "deemed" employee.

Even the judge who conducted the Judicial Review saw through this, until someone whispered in his ear that his "K" was at risk, and he suddenly swerved in the Revenue's favour on the last day.

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28th May 2010 18:31

well said

down with all those ghastly people up for more taxation al

and as for the person who said no to avoiding NI what the hell is wrong with avoiding anything

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29th May 2010 21:15

Woulde the tax office risk it

Can you imagine the mauling the tax office would get if it went after a news presenter. News coverage of IR35 would change over night!

They would be better off going after a footballer - many use Service companies to feed appearance fees through.

Actually those in entertainment are often given special dispensations from various rules - just as agents can charge actors and actresses to find them work.

 

 

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By Anonymous
31st May 2010 17:58

NI and level playing field

In answer to 'Chickpea' if we are honest it is an outrage that the widget maker with his limited company can avoid paying NI. I'd assume that with the coalition going on about fairer tax the small limited company with minimum wage plus dividends scenario is under threat, but then Labour has done nothing about it for years.

Your attitude to avoiding tax depends on where you stand. If you are working through a small limited company. IR35 type or not, and avoiding National Insurance you no doubt are happy, but do you really think that is fair?

If you are a PAYE employee of a larger concern I would have thought you could argue that you must be paying more NI than you should, since a whole chunk of the working population are not paying any NI- a lot of those with small limited companies.

The Tories have been going on about the NI increase as a tax on jobs. It would perhaps not be beyond them to notice that actually they can help balance the books by getting every taxpayer in a job or in business to pay a fair amount of NI.

 

 

 

 

 

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31st May 2010 18:15

inmyopinion

self employed people should pay less tax period

why because

- more often than not they possibly work harder than PAYE ers

- they have much more at risk

- no one gives them holiday pay or pensions

- they are unpaid tax collectors

- they have to deal with massive amounst of red tape

 

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31st May 2010 18:20

Yes but - No but

NI can appear to be unfair if you play it straight.  For example here we have someone who is employed by his service company and takes full salary to comply with IR35 and has another job (completely different trade) in which they are self-employed - Do they not pay Class 1 (ee & er), Class 2 and Class 4 NI ?

PS and they already have 30+ yrs pension credit.

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02nd Jun 2010 12:20

IR35 - small business tax review

The PCG are jumping the gun if that's what they've said on their website. There is no indication that IR35 will be repealed, only looked at (reviewed) as part of an overall small business tax review, which they have committed to doing. They've also said that part of that review will not amount to changes that would promote tax avoidance. So whatever happens to IR35, it is not likely to make things easier for contractors.

The time to believe that IR35 has been repealed, changed or clarified is when a consultation period is underway specifically relating to this tax law.

Until then, IR35 is still very much alive and well and HMRC have just updated their status manuals too based on current case law developments.

 

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02nd Jun 2010 12:26

Expert -v- Supervised

This wouldn't work at all. It would disincentise any expert deliverable provider from taking on longer projects that take up most of their company's time - whether they perform the work personally or not. It also penalises those who have regular clients they rely on for most of their work. It's the nature of the work performed (supervised or not) that must hold the key to differentiate between employee and employer as it does now under IR35.

Oversimplistic solutions like this would just make matters worse, not better.

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