BBC Contractors set up Companies in bid to Avoid Tax Through IR35 Regulations
Date: October 07, 2009
High earners hit with 50% income tax as well as regular 40% and lower tax earners are looking for the most tax efficient ways to survive financial downturn and bring home their maximum pay. HMRC figures demonstrate tax revenues have declined and are declaring higher income tax as a means of increasing revenues in the near future, which will affect all income tax payers at all levels.
In high profile news this week a sample of BBC employees have been exposed as setting up their own ltd companies rather than being employed through umbrella company IR35 routes in a bid to reduce the tax demand their freelance and contractor status attracts.
Controversially the BBC has appeared to endorse this behaviour encouraging staff to set up companies rather than continuing to work purely in a freelance capacity. IR35 legislation came into force in 2000 to fill the gap of workers that were not employed directly by an end user as permanent staff, yet neither fitted self employed status as employment contracts rolled on. You can read more about IR35 tax regulations here.
HMRC is reported to have intervened after discovering the situation with BBC contractors and requested the BBC to terminate this arrangement with staff members. The cost of dimished tax revenues by freelancers drawing dividends as a company rather than paying PAYE income tax as a contractor creates a deficit to the tune of millions of pounds annually when combined with potential NI losses which are a saving to the end user. Despite this the BBC insists that independent contractors and freelancers working within the public media empire are not only working legally but suggests that it benefits both the BBC as well as contractors who can request higher pay in lieu of holiday, sickness benefits and other benefits associated with full time staff which would not necessarily be realised by these freelancers.
Many of the cases at the BBC are high profile independent contractors working as freelancers exclusively for the BBC, which suggests by rights they should be subject to umbrella corporation and IR35 regulations. Opting for the services of an umbrella company would alleviate the need for further tax advice, Companies House account requirements, endless paperwork as well as providing a robust HMRC compliant method of collecting a salary as a contractor.
To become an employee of an umbrella company involves falling within the 1996 Employment Rights Act. This can equate to legitimately paying less income tax and being covered by many statutory rights which freelancers and contractors are beginning to enjoy. Expenses and VAT claims are also dealt with efficiently when working as a freelancer within an umbrella. Added benefits of umbrella companies such as OG include the provision of a full available package of financial products and services that range from life and health cover to leases for purchasing vehicles, contractor mortgages and many other financial benefits normally associated with permanent employment. Ask for further information regarding our contractor umbrella service packages from one our fully trained and professional staff.
