BBC stars are setting up personal service companies ahead of the introduction of the 50% income tax rate.
According to press reports, the BBC has been encouraging its highest paid TV presenters to switch over to freelance contracts, because the move will save the corporation 12.8% of their fees in National Insurance.
Tax savings for the presenters themselves are likely to be variable as once net profits exceed £300,000 the service company’s profits will be subject to marginal rate tax. Even when profits are extracted as dividends the stars will probably be paying tax at higher rates, and so the amount of tax and NICs saved is going to be slim. In a similar vein, little will be gained in terms of tax-deductible expenses, as most were already claiming these under PAYE.
Quite how the arrangements will stand up in terms of the deemed employment provisions of IR35 are another matter. The BBC’s contracts are drafted to lock in stars to prevent them working for competitors, and any substitution clause is unlikely to be acceptable to the BBC or capable of execution.
Nevertheless, there is some scope for the stars managing to achieve a few tax savings on incorporation, providing they plan properly. There are likely to be substantial intangible assets attaching to celebrities which can be assigned or sold to the new company.