The recent decision involving a former BBC Look North presenter raises a question that will be familiar to long-suffering followers of this blog: “who bears responsibility when tax avoidance schemes go wrong?” (Arrivistes may care to read this summary of the many pieces I wrote about footballers. And this, on how the professionals get away with it.)
The legal answer is straightforward.
As I explained here, the drafters of the IR35 regime intended that, if IR35 applied, the tax liability should sit with the engager (here the BBC). That made sense for several reasons: the engager were beneficiaries of the use of personal service companies (they avoided liability to employers’ NICs) and the tax can be collected from the engagers (in practice, very often it can’t be from PSCs).
But the Government of the time gave in to lobbying from engagers. And the result was the unfortunate situation we now see, where historic liabilities are shuffled onto those with the least knowledge and often without the resources to meet them.*
And alongside the legal question there is a moral one: are the presenters really to blame?
Answering that question is altogether more difficult. Some presenters will be financially sophisticated. Some will knowingly have engaged in risky tax behaviour. But a great majority will have relied on their advisers, will have been tacitly encouraged by the attitude of the BBC (‘how could the BBC be involved in tax avoidance?’) or other major broadcasters, and will have been fortified by the many years in which HMRC seemed barely to bother to apply IR35.
Is it really fair that we point the finger only at the presenter? Should the BBC escape moral obloquy? And what of the army of advisers?
Meanwhile, for those presenters who can lay reasonable claim not to be caught by IR35, further difficulties mount up.
HMRC is one actor and can behave strategically. It can choose the cases with the ‘ugliest’ fact patterns – for example, the Look North case mentioned above – and seek to establish the law by reference to those cases. Principles developed in those ‘ugly’ cases will then be applied to better fact patterns.
But the presenters are disparate. They may act in what they perceive to be their own interests rather than the collective interest. They may bear costs personally rather than pooling and sharing them – and so lack the resources to engage the best representatives. And they may not think to put their ‘best’ cases forward: will news presenters hold their cases back so that the easier categories of sports and talk presenters can go first?
These assessment whether IR35 applies involves a delicate balance of complex facts. It is far from straightforward. And it is perfectly possible – indeed it is likely – that these structural imbalances as between the disparate group of presenters, on the one hand, and HMRC, on the other, will cause whole classes of presenter who might otherwise escape liability instead to bear it.
Hard cases, as every lawyer knows, make bad law.
The weight of tax liability, moral responsibility, and the burden of bad law. All could come to fall on presenters.
*For tax liabilities accruing from the start of this tax year, we will revert to the original intention, but only in respect of public sector employers. This biased approach makes little sense. Writing on the day of his announcement, I argued that this step made little sense unless you wanted to tilt the playing field in favour of public sector outsourcers.
**Transparency note. I am professionally active in this field advising both broadcasters and presenters.