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BBC raids: A look into the broadcaster’s long track record of tax avoidance and unscrupulous financial practices in the UK

BBC was found to have been recruiting long-term employees as contractual workers to avoid income taxes

Several weeks after the Indian government blocked the BBC’s contentious documentary about Prime Minister Narendra Modi and the Gujarat riots of 2002, Indian tax authorities raided the BBC’s headquarters in New Delhi and Mumbai on Tuesday. The Income Tax department’s overnight and ongoing inspection of the BBC’s offices in Delhi and Mumbai has not yet been completed. The survey was conducted as a result of BBC’s willful disregard for the Transfer Pricing Rules and its massive profit-diversion practices.

Interestingly, this is not the first time the BBC has come under fire for adulterated tax affairs. The British Broadcaster has a notorious history of similar allegations that have surfaced from time to time.

Thousands of public employees, including those at the BBC, were not paying their taxes at the source, according to a 2012 report from the public accounts committee in the United Kingdom (UK).

David Smith, the then BBC’s head of employee tax, had admitted that 25,000 contracts covering roughly 1500 staff had been granted on an off-book, freelancing basis, but he argued that the company abided by the laws. He acknowledged, however, that the BBC was able to reduce its liability in cases where the UK’s tax, payments and customs authority, HMRC determined that the person involved was not a true freelancer due to the usage of so-called service companies, particularly by on-air talent.

BBC had accepted, that 148 of its 467 presenters were employed through personal service companies, despite them often being employed long-term. Their contracts shared characteristics with typical pay-as-you-earn (PAYE) contracts.

In 2016, HM Revenue and Customs had reportedly begun an investigation into more than 100 BBC broadcasters amid allegations that they had underpaid their income tax and National Insurance contributions. An investigation of “a very significant number of BBC news presenters” had been started by the officials.

Following the decision in a tax tribunal case brought by BBC newsreaders, Tim Wilcox and Joanna Gosling, who were appealing against a previous ruling that they failed to pay enough tax during the period when they were classified as “self-employed,” it was revealed that HMRC was conducting an investigation.

In a hearing at the First Tier Tax Tribunal, it was discovered that the agency had started looking into 23 BBC presenters in May 2015 to determine whether they had broken the IR35 laws that govern self-employment. However, Jennifer Henderson, the head of global mobility and employment at the BBC, produced evidence suggesting that this has increased to “around 100 extra cases.”

Stars, in 2018, who were dealing with hefty debts following a tax investigation accused BBC of engaging in “industrial level tax avoidance.” To get payment, freelance presenters established personal service firms, which also spared the BBC from having to cover National Insurance. The presenters, however, claimed that they only agreed to the tax arrangement because the BBC instructed it.

“But we have sat by for years watching the BBC say this is nothing to do with them, as if we all spontaneously and independently decided to set up personal service companies at the same time. We were never given the option of being staff. This was industrial level tax avoidance by the BBC,” they had claimed.

A 41-page official report by the Comptroller and Auditor General was released in November of 2018, which dived into the investigation of BBC’s engagement with personal service companies. It laid forth the facts regarding the types of people the BBC employed on a freelance basis and related problems involving such individuals, especially those it hires through personal service businesses.

The BBC was involved in yet another dispute in 2019. According to the BBC annual report, the media organization had set aside up to £12 million to settle the past tax debts of BBC broadcasters who were being investigated by HMRC for using personal service firms to evade taxes.

The National Audit Office (NAO), on the other hand, had questioned whether the payments were a proper use of BBC funds and as a result had provided a cautious assessment of the latter’s accounts.

The NAO underscores the challenges that the BBC and other organizations have encountered when attempting to avoid paying taxes, as well as the complex question of who bears the financial burden of failed tax avoidance strategies.

From the late 1990s onward, the BBC began to hire presenters through personal service businesses. A personal service company is a business created specifically to handle an employee’s affairs. The BBC entered into a contract with their firm rather than the individual employee.

The BBC would profit since the employee would be in charge of their tax affairs and the company would no longer be required to run PAYE or make employers national insurance payments. By paying themselves a modest salary through their company and getting the remainder of their income in dividends, the presenter might reduce their tax obligations. There was a hefty tax advantage from this.

The Auditor General, Gareth Davies, had reaffirmed in his audit statement, that it is evident from the testimony of individuals participating in these schemes that the BBC was a part to the agreements. The company created the contracts and actively pushed its presenters to set up their businesses in this manner. In fact, some of them have claimed that they were compelled to utilize certain arrangements. The BBC certainly benefited from these deals.

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