No tax deducted at source for five BBC people earning more than £150,000 a year
By David Hencke | 23 March 2012
“There is a need for much greater transparency at the BBC” – Stephen Barclay, Conservative MP, public accounts committee
Around 3,000 people working for the BBC are paid through personal-service companies, the broadcaster has admitted. It said that five BBC people earn more than £150,000 a year without having tax deducted at source, as the row over public officials working ‘off payroll’ spreads.
Another 31 people working at the broadcaster earn more than £100,000 a year without having tax deducted at source, according to figures released by the BBC in response to a request under the Freedom of Information Act (FOIA) from David Mowat, a Conservative MP.
The response excluded ‘talent’ – such as presenters and reporters – and people working in commercial subsidiaries, including BBC Worldwide. This means that the true scale of the practice at the BBC, which is funded by UK licence-fee payers, is higher than the numbers suggest.
Mowat told Exaro: “The government is rightly clamping down on this practice. The board of the BBC should do the same.”
He called for the BBC to be included in the Whitehall-wide review – ordered by Danny Alexander, chief secretary to the Treasury – of civil servants’ contacts.
The review was triggered after an investigation by Exaro, in conjunction with BBC2’s Newsnight, seven weeks ago revealed how the Student Loans Company was paying its chief executive, Ed Lester, through his personal-service company under concessions granted by HM Revenue & Customs (HMRC).
Anyone employed through a personal company can avoid having to pay income tax and national insurance at source, and instead pay corporation tax – at a lower level.
The chancellor, George Osborne, announced in his budget on Wednesday a crackdown on this use of personal-service companies to avoid tax.
Exaro reported last month that Alexander wanted the Whitehall review to be extended to include health authorities, local government and the BBC. However, Jeremy Hunt, culture secretary, pointed out that ministers could not order the BBC to review its contracts.
Mowat raised the issue of the BBC in the House of Commons on Wednesday night during the debate on the budget. He focussed on the broadcaster’s admission that it had 318 people earning more than £50,000 without paying tax at source. “That is not acceptable,” he told MPs.
He described Lester as “the head of the Student Loans Company who was not having tax deducted at source even though he was, to all intents and purposes, a full-time employee. The government has correctly agreed to fix that, and to undertake a review of the rest of the public sector.”
He added: “The review that is being conducted across government… explicitly excludes the BBC. I ask ministers to reconsider that.”
The BBC also said in response to the FOIA request from Mowat, who is a member of the House of Commons public accounts committee (PAC), that “service-company contracts” are “usually used as an alternative to the self-employed freelance contract because the individual chooses to provide their services through a limited company. The BBC contracts with the service company, and the service company is responsible for paying tax and [national insurance] for the worker, if appropriate.”
According to the response, the BBC had 20,000 salaried staff and “typically” 12,000 freelancers in any year. It continued: “Around 3,000 of these choose to provide their services via a limited company.”
It went on to give figures for the numbers of people working for the BBC without having tax deducted at source who earn above specific pay levels. It said that only 1,363 of them earn above £26,000. This showed, it said, that the majority of people working without tax being deducted at source worked for a range of organisations.
Stephen Barclay, another Conservative MP on the PAC, told Exaro: “This reply shows that there is a need for much greater transparency at the BBC because the figures do not include so many people from BBC’s talent – which covers its main presenters – and its commercial operations.”
“There is also a duty on the BBC Trust over accountability to check whether people who are employed through these companies do not have rolling contracts running every year and are working exclusively for the BBC.”
A BBC spokesman said: “The use of service companies is standard practice in the broadcasting industry and is in keeping with HMRC guidelines.”