BBC star names may no longer be able to reduce their tax contribution by being paid through personal service companies under proposals being drawn up by the BBC Trust.
The Public Accounts Committee accused the broadcaster of being “complicit” in tax avoidance because it allows some workers to be paid as if they were companies rather than individual staff.
The newsreader Fiona Bruce and Newsnight presenter Jeremy Paxman are among those believed to be paid in this fashion, which allows the recipient to pay corporation tax of 21 per cent on their company’s earnings, rather than income tax of up to 50 per cent. The BBC also avoids paying National Insurance contributions under this mechanism.
Lord Patten, the BBC Trust chairman said it had asked Deloitte to conduct a complete review all of its tax arrangements and the consultants’ report will be published next week.
Tax arrangements for some of those 4,500 individuals currently paid as freelancers will be tightened up. Lord Patten told the Broadcasting Press Guild: “Some freelances will be put on the payroll.” The BBC may have to renegotiate its contracts with some well-known faces.
Where service companies are currently used, Lord Patten promised to give more information to HMRC. “We want to be clear on the tax liability and we may wish to go further. I hope other public sector organisations will do the same,” he said.
He denied that the BBC used service company payments to avoid tax. “This is not a way of conniving in the avoidance of tax. It was done to avoid the licence-fee payer becoming liable for any unpaid taxes by the people being paid.”
MPs had said that the BBC could not provide “any assurance” that those employed on company contracts were paying the correct amount of tax.
Their report said: “Although the BBC told us it provides information on its off-payroll arrangements to HM Revenue & Customs, it has no means of ensuring that its freelancers are paying the right amount of tax.”