BBC finance chiefs struggle in MPs' spotlight

by Calum Fuller

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17 Jul 2012

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THE BBC'S CFO AND HEAD OF EMPLOYMENT TAX cut disconsolate figures as the Public Accounts Committee quizzed them extensively over their payroll policies.

Zarin Patel, CFO of the corporation, and David Smith, head of employment tax, were heavily criticised by MPs after they divulged that 148 of its 467 presenters were off-payroll.

In all, approximately 25,000 freelance contractors work for the broadcaster every year, and it is standard industry practice for talent such as television and radio presenters to be employed on a freelance basis through service companies. However, tax can be avoided as a result, with top earners paying corporation tax instead of the 50p top rate.

Much to their chagrin, Patel and Smith were called to review the broadcaster's use of personal service companies, which could see long-term presenters compelled to become on-staff.

Particularly scathing was chairwoman of the panel and Labour MP, Margaret Hodge, who branded the pay arrangements "utterly unacceptable", accusing the BBC of failing to pay national insurance contributions for many of its well-known faces.

Hodge has been especially vocal in recent weeks on the issue of tax, criticising the taxman for writing off £5.2bn in tax last year in what she called a "litany of tax errors".

Hodge's energy in the face of the BBC's situation makes it clear that she will pursue it and other public organisations over the issue of off-payroll staff. During the hearing, she ordered both HM Revenue & Customs and the BBC to investigate the affairs of the corporation's 148 presenters who were engaged in that way.

Hodge didn't stop there. She accused Patel of being "naïve" for suggesting such well-known talents – "the face of the BBC" – could be considered freelancers when many of them had held down long-term roles.

Patel, though, emphasised that "none of this [engaging staff through personal service companies] is designed to avoid tax", and pointed to existing IR35 legislation designed to prevent freelance workers from taking home more than on-payroll colleagues.

Ordinarily, one might have expected IR35, the rule that illustrates when so-called freelancers are treated as full-time employees for tax purposes, to affect the staff engaged off-payroll long-term. But the committee later heard from HMRC chief executive Lin Homer that just 23 IR35 investigations had been carried out last year.

Whether the 148 BBC staff in question were engaged through service companies when they should have been under BBC payroll remains to be seen.

However, in the light of Treasury secretary Danny Alexander's pledge that civil servants earning more than £220 per day for more than six months would be required to demonstrate their taxes are in order and obliged to move onto the payroll or terminate their contracts, the BBC could come under pressure to fall in line.

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