BBC forces stars to give up freelance deals due to tax-dodge perception

Jeremy Paxman and Fiona Bruce are among star BBC presenters likely to be compelled to change their freelance tax arrangements and become registered as staff employees at the Corporation.

The BBC revealed that it pays 178 freelancers more than £150,000-a-year each, as it yesterday took steps to change the employment status of some of its presenters.

It accepted that the practice adopted by many familiar Corporation figures of operating as personal service companies (PSCs) – rather than working as an employee and paying PAYE – was regarded with suspicion by the public.

Parliament’s Public Accounts Committee has also raised concerns, leading the BBC to compel 131 on-air presenters to register as staff.

A spokesman said: “The BBC wishes to address the public perception that off-payroll contracts and in particular personal service companies are used to avoid tax.”

A review by the accountants Deloitte shows that the BBC pays an army of 64,447 freelancers in total.

“As a priority”, the organisation will be subjecting 804 “on-air” freelancers to new employment tests. It said: “This could result in an estimated 131 individuals being offered staff employment when their current contract expires.”

The test will later be extended to all 6,123 individuals being paid by the BBC through PSCs, though many of these are receiving only small amounts.

The Deloitte review found the BBC pays £150,000 or more a year to 124 stars using PSCs, with 102 more receiving upwards of £100,000 and 243 being paid over £50,000 annually. An additional 54 “self-employed” freelancers are paid more than £150,000 a year.

Zarin Patel, the BBC’s chief financial officer, said yesterday that a number of these individuals, especially those who depended on the BBC for more than 80 per cent of their earnings, should be reclassified as employees. “They have the characteristics of an employee and therefore should be employed.”

Deloitte found no evidence that the BBC uses PSCs to aid income tax or National Insurance contributions avoidance.

Despite this, the stars who are transferred to staff status may be unhappy to lose the 5 per cent tax deductions that they are entitled to claim for legitimate “management expenses” when operating as personal service companies.

The subject has been a sensitive one for decades. In 1993, the Independent on Sunday exposed how the then BBC Director General John Birt was employed as a freelancer and used his status to offset the cost of his Armani suits against tax. The paper claimed that the arrangements saved Birt £30,000 a year.

Today Ms Patel stressed that no member of the current BBC executive was using a PSC. Earlier this year she was subjected to a grilling by the Public Accounts Committee when she denied that the BBC was involved in a conspiracy to cheat the Exchequer. “I emphasise that none of this is designed to avoid tax. That is not why we use an extensive number of freelance contracts at the BBC,” she told MPs.

But the chairman of the committee, Margaret Hodge MP, said: “A lot of people on these contracts are the face of the BBC and therefore to pretend that they are anything other than pretty permanent features on our television screens and on the radio is pretty naïve.”

Having called in Deloitte to carry out a review, the BBC acknowledged that its system was “inconsistent”. It admitted that “on-air talent engaged as staff, self-employed or via a personal service company” were “often doing very similar work”.

The BBC has long faced criticism over the money paid to on-screen talent at a time when its budgets and services are being cut.

It said it had previously encouraged on-air talent to use PSCs to protect the BBC from being held liable by Her Majesty’s Revenue and Customs for shortfalls in tax resulting from individuals making errors in their tax returns.