Following recent reports about how the BBC pays people who are not permanent members of staff, I thought it might be useful to outline why we do things the way we do.
Permanent members of staff at the BBC pay their taxes through PAYE like most other people up and down the country. However people will often work for us for a fixed period of time on a project before moving on to do similar work for another media company.
So, in common with every other UK broadcaster, the BBC makes extensive use of freelance and service company contracts typically in areas such as acting, directing, editing and other craft skills. Because these people work for a number of different companies in any given year they cannot be treated in the same way as permanent members of staff.
Such arrangements are either in accordance with an HMRC agreement with the TV industry or with the service company legislation introduced by HMRC on 6 April 2000.
The way it works is simple. Freelancers are paid on receipt of invoices for specific pieces of work. Fees vary depending on the nature, value and duration of the work and the degree of specialism which the freelancer or service company provides. People may undertake several different pieces of work during a year for the BBC, for which they will be paid separate and sometimes variable fees on submission of separate invoices.
By using the legislative framework, set down by HMRC, the BBC and other broadcasters can operate the most cost and time effective way of securing the services of an individual, without having to undertake a lengthy detailed review of all their other work. Whether a freelancer decides to set up a service company depends on their individual circumstances. However, once a service company is created the individual, not the BBC, is required under tax legislation to pay the correct tax and National Insurance (please see the HMRC website). That said we cooperate fully with the HMRC and provide them with annual reports of all payments made to individuals who operate service companies and provide them with all details required on any review they undertake.
The BBC has more than 12,000 freelance contributors every year with tens of thousands of contracts being issued for their work. The BBC pays these people in the way that the guidelines require us to. This is not an alternative method for permanent members of staff or any director/non-exec director roles within the organisation, who have their tax and NI contributions deducted in the normal way by the BBC.
David Smith, Head of Employment Tax, BBC