BBC tax affairs scrutinised by Commons committee

The Public Accounts Committee (PAC) report, on so-called “off-payroll arrangements” looked at how many public-sector staff are responsible for organising their own tax and national insurance payments.

The committee pointed out that off-payroll arrangements, can “generate suspicions of tax avoidance” and “fail to meet standards expected of public officials”.

An earlier, narrower Treasury investigation into pay arrangements for central government and quango staff earning over £58,200 found almost 2,500 people were being paid off-payroll.

The BBC identified 25,000 off-payroll contracts of which 13,000 were with on-air staff. It also admitted that “148 of its 467 presenters are employed by the BBC through personal service companies, despite them often being employed long-term. The BBC acknowledged that their contracts can share characteristics with typical pay as you earn (PAYE) contracts.

Freelance arrangements are not uncommon in the media where work is often ad hoc, project-based and staff may work a number of employers at any one time. But the report said this arrangement is not appropriate where staff are effectively working as permanent employees but are paid as if they work on an ad hoc, freelance basis.

This was the case with the head of the Student Loans Company, Ed Lester whose £182,000 salary was paid into his private service company, potentially saving him thousands of pounds a year in tax. This is because it would be liable for lower rate corporation rather than income tax. Ironically, the story was uncovered by the BBC.

Inadequate oversight

The PAC report noted that, in common with other parts of the public and private sectors, the BBC could not guarantee that the individuals concerned were paying the right amount of tax.

But government oversight of the freelance sector appears woefully inadequate. The report points out that the number of investigations into possible tax avoidance by the use of external companies has dropped from over 1,000 in 2003-2004 to just 23 in 2010-11.

But the BBC defended its use of freelances. Its Head of Employment Tax, David Smith, told BBC Radio 4’s Today programme: “It’s not necessarily staff positions we are using the service company route for.

“These are people who are freelance by their very nature, or certainly that’s the way their services want to be provided to the BBC and the use of the service company is therefore there to protect the BBC from any unexpected exposure should HMRC disagree with that position.”

He insisted the corporation was “complying with the legislation that is there, absolutely”.