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HMRC wins IR35 court case against freelancers

HM Revenue & Customs has won a case against three BBC freelance presenters who were considered liable for income tax and national insurance bills under IR35 legislation.

Three BBC presenters – Joanna Gosling, David Eades and Tim Willcox – were pursued by HMRC for £920k as part of a crackdown on the use of personal service companies (PSCs).

The taxman’s victory is the latest in a series of test cases going through the courts, in which HM Revenue & Customs is claiming that freelance workers have breached IR35 tax avoidance legislation that is aimed at contractors working for a single company, who are employees in all but name.

In a first-tier tribunal decision, the judges said there was “sufficient mutuality and at least a sufficient framework of control to place the assumed relationships between the BBC and the presenters in the employment field”.

There are around 100 other BBC presenters in the same boat, which means we could see similar verdicts in time.

  

Homeownership ‘only a dream’ for many self-employed

More than two thirds (68%) of self-employed individuals feel disadvantaged by their self-employed status when trying to get a mortgage. Almost half (48%) of self-employed workers felt the perceived or actual difficulty they experienced during the mortgage process had put them off being self-employed.

Based on mortgage application data, self-employed mortgage borrowers are a safer bet than first-time buyers, according to Kensington’s Affordability Tracker (KAT). The analysis for this year’s second quarter revealed that self-employed borrowers are more conservative than first-time buyers and typically borrow less than borrowers would permit.

The average self-employed mortgage customer in the UK took out a mortgage that was 28% less than the maximum possible sum that could be borrowed. By contrast, the average first-time buyer borrowed 19% below the maximum possible sum that could have been loaned.

 

Uber granted two-month extension to London licence

Uber’s license to operate in London has not been renewed, granting them only a 2 month extension. This extension is set to expire tonight.

This is the second time in two years TFL have rebuffed Uber’s application to have a fully operating license in London. Find out more here. 

 

Lower pay fails to deter arts students

Arts and humanities degrees have taken a hit in recent years with science so much more in vogue. However, they continue to be among the most popular with students, despite frequent warnings that other subjects have greater earnings potential.

This renaissance was welcome because the numbers accepted on to degrees in education and linguistics are down by 6 per cent this year, by 5 per cent in history and philosophy, and 3 per cent in the creative arts and design. English literature appears to be in free fall. Arts subjects fill the bottom three places in the salaries table published in The Times and Sunday Times Good University Guide, and most of them are lowly ranked in the employment table. 

Numbers have risen this year in non-European languages, although only compared with a particularly low enrolment in 2018. The decline in European languages has continued, with the total starting degrees down by more than 1,000 — or 25 per cent — since £9,000 fees were introduced in 2012.

Vice-chancellors argue that prospective students are well aware of labour market statistics when they apply, but are pursuing their interests. Most of those taking creative arts degrees, for example, are prepared for a possible period of freelancing after graduation. Self-employment is finally a choice rather than a last resort for many graduates.

 

Why the end could be nigh for the gig economy

The Assembly bill 5 is a law that is being introduced to make it harder for companies to label workers as independent contractors instead of employees. Both Uber and Lyft are trying to fight this bill as their business model relies on drivers who set their own hours and do not receive employment benefits like holiday or sick pay.

William Gould, professor emeritus at Stanford Law School and an expert in the gig economy says:

“I think it’s quite clear that Uber is in the business of transportation, and these drivers are providing transportation for them,” he said. Therefore, he believes the AB 5 law means “substantial difficulty for their business model”.

Find out more about Uber’s fight against employee rights here.

 

What IR35 tax tribunal ruling means for freelancers 

At the heart of the dispute is a long-standing legal confusion over the IR35 law introduced in 1999 when Gordon Brown was the chancellor. It was designed to prevent workers from supplying their services through an intermediary for the purposes of avoiding tax. Such workers are described as “disguised employees”. 

The legislation was criticised as being poorly conceived and schemes sprung up where companies offered to look after contractors’ affairs, assuring them that they were operating within the law. Most of these schemes have been closed, but HMRC has continued chasing unpaid tax. Thousands could face legal action.

Christa Ackroyd, 60, who presented the BBC news programme Look North, was paid through a personal service company between 2006 and 2013. A tax tribunal ruled in February last year that she had to pay £419,151 in unpaid tax, but she said she had simply followed BBC advice. She has appealed against the decision and is awaiting a verdict in the Upper Tribunal. 

More than 600 freelance broadcasters at the BBC have been caught up in the row, according to information that was presented to parliament’s Public Accounts Committee.

Is the BBC liable for unpaid tax?

The corporation admits that it encouraged staff to work through PSCs, but has said it was following tax guidelines as it understood them.

It has demanded that HMRC “provides the greater clarity that is still needed to avoid others having to go through this ordeal” and said it had “tried for a long time” to get the taxman to provide a set of guidelines.

Are the rules changing?

In the November 2018 budget, the chancellor Philip Hammond promised to close the loophole. He pledged that private companies would in April 2020 become liable for declaring the tax status of contractors, and that HMRC would fine them if they got the calculations wrong.

Small companies would be exempt because the administrative burden is considered too great. A small company is one with a turnover of less than £10.2 million, a balance sheet of less than £5.1 million, and 50 or fewer people on the payroll.

Hammond said the changes, which had been introduced in the public sector in 2017, would raise £3 billion for the taxman, but there have been moves to delay their introduction over fears about the burden they will place on businesses.

 

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