The BBC is negotiating with HM Revenue & Customs (HMRC) to reach a solution for determining the employment status of off-payroll workers. The talks are underway to determine whether its off-payroll workers are considered self-employed as per HMRC’s IR35 reform introduced in April 2017.
The difficulties in administering the tax legislation and impracticalities in using the Check of Employment Status for Tax (CEST) tool were the main topics discussed during the meeting. Also, the stress caused to BBC workers as a result of the tax legislation was highlighted in the meeting.
The fact that the IR35 legislation has been discussed in the meeting between the BBC and the HMRC is not surprising. The tax legislation has attracted a lot of criticisms for being impractical and unfair for off-payroll workers.
On its website, the BBC has published information for ‘freelancers’ as to how they can provide service while remaining outside of IR35. In the past, freelancers who worked behind the camera including cameramen could apply for tax exemption by submitting an LP10 letter to HMRC. They were granted an exemption if they offered services for ten or fewer days and provided the right answers to a questionnaire regarding working conditions. HMRC used a grading list that would indicate workers who operated inside the IR35 rules.
After the introduction of IR35 reform for public sector bodies, the BBC had hired Deloitte to offer guidance regarding the tax legislation to workers and the management. Mark Groom, a specialist tax advisor at Deloitte, had stated that it could only offer general advice and the impact of the legislation depended on the specific circumstances of off-payroll workers.
The CEST tool that is provided by HMRC to check employment status of independent contractors has become a laughing stock in the UK. Liz Kershaw, the BBC radio presenter, had stated that she had been questioned whether she provided her own plant and machinery when using the tool to determine her employment status.
The BBC is not the only public-sector body that has been struggling after the introduction of the IR35 reform. Various NHS trusts have faced criticism for a blanket approach to IR35 to avoid hefty HMRC penalties.
What’s positive about BBC entering into negotiation with HMRC is that it opens up the possibility for other public-sector bodies to do the same. That’s why HMRC will be wary of setting any precedent during its negotiation with the BBC. However, it may consider ‘special’ rules for the BBC, which demonstrates that the IR35 reform and especially the CEST tool does not work well for every organisation. This should serve as a cautionary reminder to HMRC that it could have to enter into similar arrangements with other public and private sector companies that could involve a lot of time, cost, and other resources. It defeats the very purpose of introducing the reform, which is to improve the efficiency of the tax compliance procedure and boost tax revenues.