More unrest at the BBC – now it’s about personal service contracts and a word of warning about the ostensibly self-employed

Perhaps the most surprising aspect of “employment” provided through personal service companies is that such arrangements have lasted as long as they have.

When the BBC first published the salaries of its top presenters last year there were some notable omissions. For example David Dimbleby didn’t appear on the list. Why? Because he is paid by the BBC through a separate production company. Similar arrangements are in place for Lord Alan Sugar, John Torode and Gregg Wallace.

For years the BBC has encouraged and, some have argued, mandated some of their key talent to be paid through a personal service company. The idea is that the company provides the services of, say, the presenter to the BBC and the BBC therefore pays the company for the services provided. The upshot is that the presenter benefits from the lower tax regime for limited companies (currently 20%) rather than the higher personal tax rates of 40% over £45,000 and 45% over £150,000.

Unsurprisingly, HMRC have been chipping away at such arrangements for a number of years and, as far as the BBC is concerned, matters recently came to a head with a victory in the High Court against BBC Look North presenter Christa Ackroyd. Ms Ackroyd was sacked by the BBC in 2013 after HMRC demanded unpaid taxes from her on the basis that she was, in reality, an employee of the BBC and therefore required to be taxed under Schedule E. Her HMRC appeal was unsuccessful and she is now facing a bill for £419,151 in back taxes, plus undisclosed legal costs. An HMRC spokesman reiterated their long held view that “employment status is never a matter of choice…It is always dictated by the facts and when the wrong tax is being paid we put things right”.

You may take the view that Ms Ackroyd had tried it on and been caught out but, as is so often the case, it is by no means that straightforward and the BBC is very much under scrutiny as a result of its actions.

Ministry of Justice confirm huge increase in Employment Tribunal claims

I’ll start with the big headline: Employment Tribunal claims (brought by individual Claimants) increased by 90% in the period between October to December 2017 (in comparison with the same period in 2016). To cut a long story short, the recent abolition of Employment Tribunal fees has led to Tribunal claims nearly doubling.

A small disclaimer is that the above statistic is currently a provisional figure, however, in reality, that figure tallies with my own expectations and experience over the past 12 months.

These statistics are slightly ironic given that, before the Supreme Court found Employment Tribunal fees to be unlawful, one of the main reasons the lower courts refused to find Employment Tribunal fees unlawful because there was ‘no evidence’ of the fees preventing individuals from accessing justice.

Is the National Living Wage causing problems?

I think that most employers would take the view that the principle that employees should be paid a fair wage for their work is one that should be supported. However, sometimes a one size fits all approach can throw up anomalies. I should be clear: I’m not talking about those who exploit people to work excessively long hours for very poor pay (as low as £2.00 per hour), often in plainly unacceptable working conditions. I’ve written in this blog about people who have been kept effectively as slaves in the most appalling circumstances and these employers should be rooted out and dealt with severely, where appropriate in the criminal courts.

It is worth remembering that, when introduced on 1 April 1999, the adult National Minimum Wage was £3.60 per hour. Since then, it increased steadily for a number of years (around or a little ahead of inflation) but the big jump came on 1 April 2016 when it was hiked from £6.70 to £7.20 as part of the merger and rebrand as the National Living Wage. Subsequent increases (including those coming into effect on 1 April 2018) are here.

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Employees who are paid below the minimum wage can complain to an employment tribunal or to HMRC. If HMRC upholds the complaint the employer can be sent a notice of arrears plus a penalty. The maximum fine for non-payment (in addition to making good the arrears) is £20,000 per worker. In recent years HMRC have made a point of publishing (with high profile PR) lists of those businesses that have paid below the prescribed rates. It is not widely known that, in addition, directors of defaulting companies can be banned from being directors (or shadow directors) of any company for up to fifteen years.

So, what are the problems referred to in the title?