In Paya Limited and Tim Wilcox Limited v HMRC [2016] TC03856 the BBC fails to persuade the First Tier Tax Tribunal (FTT) that 'Aunty knows best' when it comes to IR35 witness evidence
- As part of its ongoing review of personal service companies (PSCs) within the BBC HMRC had selected two companies owned by news presenters Joanna Oliver and Tim Wilcox for an IR35 enquiry.
- In performing its employment status review HMRC had made enquiries of the BBC, the end client for both intermediary companies and the BBC had put forward its witnesses at the time.
- HMRC was working its way through a long list of disguised employment cases at the BBC and this was taking time on both sides.
- Following an internal review the BBC decided that as it had so many of its ‘talent’ under IR35 review that it should take control of the evidence that it was giving the tax tribunal, taxpayers and HMRC by briefing its witnesses and ensuring that they were familiar with the complex IR35 legislation.
- The BBC also wished to provide different witnesses than it had originally provided to HMRC.
- The BBC did not wish to be party to the PSC IR35 appeals, merely to insert the evidence that it wanted to give into proceedings.
The FTT found that the BBC Application’s involved:
(1) The BBC filing and serving witness evidence in the Appellants’ appeals, even if neither party wished to call that or those witnesses;
(2) The parties having only conditional access to the BBC witnesses: meetings were only to happen in the presence of the BBC’s legal team, and even then, only if the witness is willing to attend; and
(3) The BBC retaining control over the evidence given by the BBC witnesses.
In short, the “evidence that ultimately will be adduced is the evidence that the BBC and the witness decide is appropriate”.
Judge Ann Redston found that:
- The FTT has no jurisdiction to allow an application from a non-party to provide witness evidence of its own motion.
- It is for the parties to decide what evidence to call. The BBC Application would undermine their right to put forward their case. This would be unfair and unjust, and a departure from the overriding objective.
She said that, “it is clear that the BBC is seeking to interfere in these appeals because it perceives the outcome of the appeals as impacting upon its own interests.”
Comment
'Aunty Beeb's attempt to manipulate its witnesses and their evidence is quite extraordinary and useful for conspiracy theorists "Just what are they trying to cover up?" Not being party to the proceedings the corporation has no right of appeal against this decision. Both the taxpayers and HMRC opposed the application and so it is interesting that the matter was tested.
In 2012, following the House of Commons Public Accounts Committee’s (PAC) report into Off Payroll Appointments within the public sector, the BBC agreed to commission its own independent review of this area. Accountants Deloitte performed a review and it revealed that the BBC’s policy was to engage its on air talent via PSCs. They identified 469 cases for review, considering that 96 cases were high risk: they would not stand up to HMRC’s employment tests, and the contracts for 207 radio presenters looked pretty risky too.
HMRC has been plugging away at the list of presenters and their companies since the PAC enquiry which had found that from over 1,000 investigations in 2003-04 HMRC managed just 23 in 2010-11. HMRC said in 2012 that it intended to increase this to 230 a year.
It was not only the BBC at fault, the PAC also noted that some 2,400 individuals were found working via PSCs in government departments including the head of the Student Loans company.
Whilst the BBC now has agreed an employment status test with HMRC to minimise IR35 issues going forward, it is clear that HMRC does not have the resources to check on the estimated 27,000 cases of PSCs in the public sector. It is proposed that from 2017 that where a worker supplies their services to the public sector via a PSC, the public sector organisation will be treated as the employer and it will be required to deduct PAYE and NICs from all the worker's earnings from the engagement
Links
Guides for subscribers: (you can click here to subscribe)
Our Practical Tax Guide to IR35
The current rules, what's new and worked examples.
Personal Service Companies PSC
Our guide to tax for the PSC and its owner
Employment Status
Checklist and tests for employers
External link
Paya Limited and Tim Wilcox Limited v HMRC [2016] TC03856
