In the House of Commons last week, Gregory Campbell, who is Shadow DUP Spokesperson for the Cabinet Office asked “if [the Chancellor of the Exchequer] will make an assessment of the implications for his tax policies of the conclusion of the report entitled the BBC’s engagement with personal service companies, published by the National Audit Office in November 2018.”
Mel Stride, Financial Secretary to the Treasury and Paymaster General commented as follows;
“The National Audit Office (NAO) report concerns one organisation’s use of personal service companies over the last two decades, concluding with its experience of implementing the April 2017 reform of the off-payroll working rules in the public sector. The report does not comment on the off-payroll working rules themselves.
The off-payroll working rules ensure that individuals who work through their own personal service company, and would have been an employee had they provided their services directly, pay broadly the same tax and National Insurance contributions (NICs) as other employees. The rules do not affect the genuinely self-employed.”
It seems that the Government are not looking to learn from mistakes made with one of the UK’s most prominent public-sector bodies; the BBC made grave mistakes in determining the employment status of its self-employed workforce. Many workers were reportedly steered towards setting up their own limited company, many of whom did not want to do so, but agreed, purely to obtain work with the BBC.
In April 2017, IR35 reform was introduced within the public sector and the BBC become responsible for determining the employment status of its off-payroll workers. The BBC used HMRC’s ‘Check Employment Status for ‘tax’ tool (CEST) to help determine the employment status of its off-payroll workers. CEST provided an indeterminate response in half of 255 on-air cases initially reviewed, and 92% of on-air freelancers were given an inside IR35 outcome, which was in contrast to the BBC’s previous findings.
Many workers have now been forced to operate inside of IR35, resulting in tax and NI being deducted from their income at source, and with the BBC having to provide some workers with ‘bridging loans’ to help certain individuals with cash-flow problems. In a Select Committee Hearing held on 20th March 2018, which was attended by a radio and TV presenter, concerns regarding the BBC’s treatment of freelancers was highlighted, in addition to the unsuitability of HMRC’s CEST Tool, but one of the most concerning aspects was the level of emotional distress it had caused workers.
The fact that the Government are not looking to use the evidence highlighted within the NAO’s investigation into the BBC as something to learn from, prior to the introduction of further reform, is disgraceful. Whilst the report highlighted failings with the BBC, it equally highlights failings with HMRC, particularly with the CEST tool itself, and in not leaving sufficient time for large organisations like the BBC to get to grips with the change in legislation.
Mel Stride’s final comment that “The rules do not affect the genuinely self-employed” is completely incorrect and demonstrates what a limited grasp of the legislation he has.
For anyone who has been involved in an IR35 enquiry or has had to have their status determined by their end client (due to IR35 reform in the public sector), this is not the case and it is still necessary for a worker to prove that they are self-employed. In the public sector particularly, many ‘genuinely self-employed’ individuals would have been wrongly placed inside of IR35 due to blanket decisions being adopted by end clients such as the NHS.
The only saving grace is that IR35 reform within the private sector is not going to happen until 2020, so someone within the Government/HMRC has clearly been able to see sense. Additionally, HMRC have indicated that they will review the CEST tool, and this too will certainly be welcome, but as to whether this will resolve any issues with IR35 reform, it remains to be seen and we should not hold our breath.