Patel: Reports on BBC tax ‘misleading’

Zarin Patel Zarin Patel: BBC isn't trying to dodge tax

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The BBC's chief financial officer has emailed all BBC staff to insist the BBC is not trying to dodge tax.

It comes after the Daily Mail reported, and subsequently took down from its website, that former BBC Leeds presenter Paul Carrington was given no option but to be paid through a private service company. This follows the claim by Margaret Hodge MP that another presenter of 20 years felt 'bullied' to go onto a service contract or face a significant pay cut.

Zarin Patel admits in the email, which is also published on the About the BBC blog, that presenters can be given no choice but to be paid through private service companies instead of as BBC staff.

'Freelance contractors who earn more than £10,000 a year are told that we prefer them to set up a service company and, in many cases, this will be their only option,' she says.

But she stipulates in the email that tax avoidance is not the motivation for these arrangements:

'Contrary to these reports, we have not told thousands of workers to go 'off the books' in order to cut our tax bill, neither are we 'avoiding national insurance' contributions by paying individuals via service companies,' she says.

She goes on to say 'the BBC does not expect anyone to use the service company arrangement to 'dodge tax' by paying the lower corporation rate when they are not eligible to do so'.

'The arrangements are designed to ensure the correct amount is payable, while ensuring that we can offer the flexibility needed in the broadcasting industry, where individuals may work with several different organisations during the year,' she says.

Standard practice

The issue was brought up by Hodge in a Public Accounts Committee review of public sector pay. That review was initiated after a Newsnight report which found that the Student Loans Company's chief executive received his £182,000 pay package without deductions for tax or national insurance.

When Patel was called as a witness to the Public Accounts Committee's investigation last week she promised MPs that the BBC will review its tax arrangements. The HM Revenue & Customs said they would also be conducting a review.

The chief financial officer revealed in the committee that 148 BBC presenters are on long term contracts through service companies and so are not taxed at source.

Patel admitted in the committee that service companies saved the BBC money as it didn't have to pay employer national insurance contributions, sickness pay, holiday pay or pension contributions for those employed in this way.

John Whiting from the Chartered Institute of Taxation explained on the BBC News website that it is standard practice for large corporations to employ freelancers through a service company to make sure the employers are not chased for tax payments.

'If the hirer treats an employee as self-employed and if the Revenue come along at a later date and say they are actually an employee, it's then up to the hirer to pay the PAYE and NI that would be due. In effect it's a penalty on the employer,' he says.

'If there's any doubt on whether someone is self-employed or not, it's become very prevalent that the hirer insists on the person being hired through their own company to provide a safeguard.'

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