Employees face only 20% corporation tax after having wages paid into service companies
Two highly paid full-time BBC executives are able
to avoid income tax because they are having their earnings paid into
service companies.
The employees, each earning more than £100,000
annually, have been working for the corporation for more than a year and
continue to do so. The tax arrangement could save them thousands of
pounds, as it allows them to pay corporation tax of 20 per cent, rather
than income tax at much higher rates. The revelation will be an
embarrassment for the BBC at a time when tax avoidance has been
described as "morally repugnant" by George Osborne.
The use of
service companies is one of a number of tax avoidance measures that the
chancellor vowed to clamp down on in his budget last month. Under rule
IR35, individuals using service companies for their earnings should be
paying full income tax and national insurance unless they are genuine
freelancers with multiple sources of income and without fixed
employment.
However, in response to an inquiry from Labour MP
David Winnick about the number of BBC employees working full-time and
paid more than £100,000 a year, Mark Thompson, the BBC's
director-general, wrote: "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."
Thompson
would not reveal their identities, but said that they were not in a
"senior management position". He said the corporation was "reviewing
both of these arrangements" to "ensure that their contractual status
reflects their most recent responsibilities". He added: "We do not
engage any other service companies on a continuous basis."
Winnick,
who sits on 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."
According to a response to a freedom of
information request from Tory MP David Mowat, the BBC pays 3,000
freelancers through service companies, of which 36 received £100,000 in
2011. However, those figures do not include "on-air" talent, which the
corporation has refused to comment on as it could put it at a commercial
disadvantage.
Mowat said he believed that the use of service
companies by employees in continuous and full-time employment at the BBC
must be investigated. He said: "The BBC, as an ethical organisation,
should report themselves to HM Revenue and Customs [HMRC] and ask for a
thorough review of the tax arrangements they have with these two
individuals."
Tax has been at the centre of political debate since
last month's budget. Last week, Osborne said he was shocked at the
scale of tax avoidance and said he had seen "anonymised" tax returns
submitted by multi-millionaires using aggressive avoidance schemes to
reduce their tax bills.
HMRC found that the income tax rate among
some of the highest earners was, on average, 10 per cent. Osborne said
the HMRC study convinced him of the need to "take action" to ensure high
earners pay more income tax. Tax arrangements have been a
dominant theme in the London mayoral campaign
A BBC spokeswoman 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."
Article taken from The Guardian
