13th March 2018
A court case involving BBC presenter Christa Ackroyd ended with an HMRC win and the presenter facing a six-figure tax bill.
HR managers should urgently review the status of any arrangements they currently have in their organisation, following the court’s decision. The practice has been standard industry practice for over twenty years but was subject to an IR35 legislation crackdown by the HMRC in the public sector in 2016, and now seems to be heading to close this loophole in the private sector.
It has been insinuated that the BBC was not blameless, and indeed social media commentators have been vocal in suggesting that the BBC may have profited from the arrangement.
What is IR35?
IR35, or ‘off-payroll working’ is HMRC tax legislation designed to tackle tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would ordinarily be classified as an employee if the intermediary was not used. HMRC classes these workers as ‘disguised employees’ and IR35 affects all contractors who do not meet HMRC’s definition of ‘self-employment’.
In the court case HMRC successfully argued that Ackroyd was an employee, and the court agreed that Ackroyd was effectively under a “hypothetical contract”. She worked for 225 days every year under her seven-year contract with the BBC, which restricted her from providing services to other companies. It was unsuccessfully argued that the use of personal service companies was “standard industry practice” at the time.
Is this the end of self-employment?
There’s a lot of scaremongering at the moment but genuine self-employed people can stay working like this and employers can continue to use contractors. There is no doubt, however, that HMRC are tightening all these loopholes and significantly the digitization of tax records will start to highlight those working at the edge of legal practices.
Employers and this type of employee need to change, adapt, stay educated and stay reasonable. HR managers need to ensure that they have tight records and good HR systems to ensure they know who they are employing and on what terms.”