• Careers
  • Contact Us

IR35 - What Can Employers Learn from the BBC Presenters Case?

on Friday, 11 October 2019.

The First Tier Tax tribunal has held that IR35 applied to the provision of services of three BBC presenters through their personal service companies.

The First Tier Tax tribunal has held that IR35 applied to the provision of services of three BBC presenters through their personal service companies.

What Does the Law Say?

Where a contractor provides services to their client through an intermediary, for example a limited company, but would be an employee of the client if the intermediary was not used, the government requires the client to deduct tax and national insurance as if the contractor were an employee. 

The government guidance which sets out these rules is called IR35. 

Determining Employment Status

Joanna Gosling, Tim Willcox and David Eades are news presenters who were all engaged by the BBC for the BBC World Channel through their own personal service companies. Each presenter was at all times the sole shareholder and a director of the company.

In determining the employment status of the presenters for income tax purposes the First Tier Tax Tribunal made reference to the well-established principles set out in the case of Ready Mixed Concrete (South East) Ltd v Minister for Pensions and National Insurance:

  • mutuality of obligation between the parties
  • control
  • whether other contractual provisions are consistent with a contract for service

Throughout a lengthy business relationship, the presenters (through their personal service companies) were all engaged directly by the BBC under a series of fixed term contracts. Within the contract, they were required to provide their services for a specified number of days in any one year, usually amounting to a 150 days.

The contract fee for the minimum days was usually expressed as an annual amount with any additional programmes charged at a daily rate. The BBC had first call over the presenters time and if they wanted to accept any external work, consent was required from the BBC to pursue these opportunities. In addition if a presenter could not undertake the work, then a replacement from an established BBC pool would step into their place.

 

Loading Poll...

 

In light of these arrangements, the First Tax Tier Tribunal found that IR35 did apply. The contracts gave rise to an obligation to provide work and undertake it for a substantial part of the year and contained no meaningful right of substitution. The BBC also exercised a degree of control consistent with an employment relationship. In particular:

  • It determined the place of work and the presenters were obliged to attend meetings, training and appraisals.

  • Presenters were contractually obliged to adhere to the BBC's editorial guidelines and, although they provided significant creative input, ultimate editorial control rested with the BBC, even if not always directly or immediately exercised.

  • The presenters were subject to restrictions on outside activities, including working for others.

Changes to IR35

In April 2017, there were changes to the IR35 regime in the public sector. The reforms shifted the responsibility onto public sector organisations as the end client to determine the status of the contractor providing services through their personal service company. If a contractor is deemed to be inside IR35, the public organisation is required to deduct income tax and National Insurance as they would for employees. Failure to do so could make them liable for any unpaid taxes interest and penalties.

From April 2020 these rules will apply in the private sector.

Best Practice

The case serves as a reminder to take extra precaution when engaging individuals through their personal service companies.

Private sector employers should be reviewing their contractual arrangements with contractors now to ensure they will be ready for the changes coming in April 2020.

A right of substitution can be an important factor in determining status. However, a right to substitute from a limited pool of people may not be enough to take a contractor outside the scope of IR35.


For specialist legal advice on IR35, please contact Michael Delaney in our Employment Law team on 01923 919 316 or complete the below form.

Get in Touch

First name(*)
Please enter your first name.
Last name(*)
Invalid Input
Email address(*)
Please enter a valid email address
Telephone
Please insert your telephone number.
How would you like us to contact you?

Invalid Input
How can we help you?(*)
Please limit text to alphanumeric and the following special characters: £.%,'"?!£$%^&*()_-=+:;@#`

See our privacy page to find out how we use and protect your data.

Invalid Input