A ruling yesterday at the Royal Courts of Justice for former 'Look North' host Christa Ackroyd could have impact on more BBC presenters, who may face tax bills for thousands of pounds. The case pivots on whether Ackroyd was self-employed or employed by the BBC, and therefore may have implications for self employed workers in a similar set up across other sectors.
Working on a personal service company contract
Ackroyd worked with the BBC on what is known as a personal service company contract. This means she was self-employed and using a limited company, instead of being employed directly on the corporation’s payroll. Using a company meant much lower tax payments needed to be paid.
She was fired by the BBC in 2013 over an alleged contract breach after HMRC demanded unpaid taxes because it said she was, in reality, an employee of the BBC and not allowed the tax breaks.
Ackroyd appealed against HMRC, but has now lost this appeal.
HMRC are demanding over £400,000 from her in income tax and National Insurance contributions.
Paul Burton, Head of Frettens' Employment Team, says “Employment status is dictated by facts and a worker cannot simply choose a route which suits them better. The HMRC are bound to pursue people who are paying the wrong tax and, in high profile cases, they are likely to take a very strong stance on the matter by way of example."
Even though documents showed that the BBC had suggested that she should work using a personal service company contract, it was also shown during the proceedings that 98% of her earnings in 2009 came from the BBC. Her co-presenter of the 'Look North' programme was a BBC employee.
Furthermore, the BBC restricted her from working for other organisations without BBC permission. For example, the BBC wanted her to stop writing a column for the Sunday Express and made a payment of more than £40,000 which “appears to have been linked” to her giving it up.
How must employers comply?
Paul says "The tribunal ruling does not set legal case law. However, this does mark the first time, in seven years, that the HMRC has won a case relating to IR35 rules. These are the rules which govern the tax paid by those who work for clients through an intermediary. This decision will nevertheless be seen as a setback for other appellants taking similar cases to the tribunal."
At Frettens, all of our solicitors offer a free initial meeting or chat on the phone to answer your questions. If this article raises issues for you or your business, please call us on 01202 499255 and Paul or Kate will be happy to discuss it with you.