Both BBC employees work full-time and are paid more than £100,000 per annum and have allegedly avoided income tax by having earnings paid into service companies.
David Mowat, Tory MP, has spoken out against the use of service companies by full-time employees and has raised his concern that HMRC should launch a tax investigation into the BBC’s tax affairs:
“The BBC, as an ethical organisation, should report themselves to HM Revenue and Customs and ask for a thorough review of the tax arrangements they have with these two individuals.”
The tax avoidance arrangement has allegedly allowed the two BBC employees to save thousands of pounds in income tax by paying a lower tax rate of 20 percent in corporation tax instead of higher income tax rates.
In his 2012 Budget, last month, George Osborne vowed to take a tougher stance on tax avoidance schemes adopted in the UK.
Under IR35 tax legislation only genuine freelancers who are not in fixed employment and receive payments from a number of sources are eligible to be paid through service companies. Those working in fixed employment should therefore pay full income tax and national insurance contributions.
David Winnick, Labour MP and member of the culture, media and sport select committee, said:
“I think it is unacceptable that a constituent of mine earning £20,000 a year is potentially paying more in tax proportionally than highly paid executives at the BBC. It isn’t fair, and I have called for the BBC to ensure that these people are paid in the normal way. I have written to Mark Thompson to ask him to inform me when he has changed the tax status of these employees.”
When Winnick asked the BBC how many of their employees were working full-time and paid an annual salary of more than £100,000; BBC’s director general, Mark Thompson, responded by writing:
“We do have two service company arrangements in place for two individuals who have been paid more than £100,000 over the last 12 months, and whose work is now of a continuing nature, but who were both initially contracted on a fixed term basis.
“[The BBC is] reviewing both of these arrangements [to] ensure that their contractual status reflects their most recent responsibilities.
“We do not engage in any other service companies on a continuous basis.”
In his response, Thompson kept the identity of the two alleged BBC employees undisclosed.
A spokeswoman for BBC said:
“The use of service companies is standard practice in the broadcasting industry and is entirely in keeping with HMRC guidelines. The great majority of these are people who have been hired to do specific jobs for a fixed period of time and when a person is contracted in this way it is their responsibility to organise their tax arrangements directly with the HMRC.”
Tax avoidance has been a hot political topic since George Osborne’s budget speech on 21 March 2012 and the Chancellor of the Exchequer has since come forward to describe tax avoidance as ‘morally repugnant’.
Kevin Kinsella, of KinsellaTax, said:
“These schemes exist for people to make legal arrangements to pay as little tax as is legally possible. There really is not enough information given to be able to make any further comments.”
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Although tax avoidance is a legal structuring of tax affairs, if HMRC discover an ‘aggressive’ tax avoidance scheme they will work to shut it down.
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