BBC Trust

Earlier this year the Chief Secretary to the Treasury commissioned a review of the use of freelancers in central government. The Public Accounts Committee called a hearing on the report, which was held on Monday 16 July, and asked the BBC Executive to attend as a witness. Following the hearing, the BBC commissioned Deloitte to carry out an external review of the BBC's freelancer arrangements.

Responding to the publication of the review, BBC Trustee and Chair of the Trust’s Finance Committee, Anthony Fry said:

"The BBC will always need to employ a large number of freelancers in order to deliver the best programmes for audiences, but it must do so on the right basis. We are pleased that Deloitte found a high standard of compliance and no evidence of tax avoidance in this complex area.

"Nonetheless, as a public body, the BBC has responsibilities which go beyond legal compliance. We welcome the move to ensure that those who look like employees are treated as such in any contracts moving forward, and, where service companies are used, to work more closely with HMRC to improve the information we provide.

"We approve these and other recommendations made by the Executive in this area. We will conduct a follow-up review in a year’s time to confirm that the recommendations are being addressed effectively."

Below you will find links to the review, the BBC Executive's report and the Trust's response.

1. Earlier this year, the Chief Secretary to the Treasury commissioned a review of the use of freelancers in central government. The Public Accounts Committee called a hearing on the report, which was held on Monday 16 July, and asked the BBC Executive to attend as a witness. Following the hearing, the BBC commissioned Deloitte to carry out an external review of the BBC’s freelancer arrangements, the results of which have today been published alongside a report produced by the Executive.
   
   
2. We are pleased to report that the Deloitte review has found no evidence that the BBC has tried to avoid tax and more generally, that there is a high level of tax compliance within the BBC. The BBC employs a large number of freelancers to make its programmes and, in the vast majority of cases, freelance arrangements are clear, fair and appropriate. In these areas, no policy changes are needed. There are, however, some examples of the policy having been applied inconsistently indicating that there is a need to strengthen the framework governing employment status. The review has highlighted some cases where individuals are being paid through service companies or as sole traders when they share many characteristics with other individuals who are BBC staff.
   
   
3. The BBC’s use of service companies complies with HMRC rules. The service company is responsible for paying any tax due and if the rules are followed correctly the arrangements should not result in any tax avoidance or reduction in National Insurance revenues to the Exchequer. Such arrangements ensure that if there were ever any question of an individual paying too little tax, the liability would remain with the service company and not get passed on to the licence fee payer. We recognise, however, that it is harder for HMRC to check whether the right amount of tax has been paid under service company arrangements and this uncertainty has prompted the concerns of the Public Accounts Committee.  Therefore, we approve the Executive’s proposed changes and will monitor implementation closely in the ways set out below: 
   
   i.        The BBC will work with HMRC to develop clear and consistent criteria for the tax treatment of the on-air roles which are not covered by HMRC guidance.
   
   The Trust has asked the Executive to provide quarterly progress reports to the Trust Finance Committee, the first of which will be due in January 2013.
   
   ii.      The BBC will introduce a more specific employment test to ensure that if an individual clearly displays the characteristics of an employee, he or she will be engaged as staff with tax and National Insurance deducted at source rather than through a service company.
   
   The Trust will engage tax consultants to review the new test to ensure it is fit for purpose.
   
   iii.    As a matter of priority, the new test will be applied to the cases identified by Deloitte where the employment status of an individual looks unclear. If the individual has the characteristics of an employee, the BBC will aim to transfer the individual to an employment contract as soon as contractually practicable.
   
   We have asked that the Executive submits the results of its assessment to the Trust as part of its quarterly updates. We have also sought confirmation that such changes can and will be made without undue legal risk or cost to the licence fee payer.
   
   iv.    If the BBC does engage a service company it will use stronger contract clauses which require individuals to demonstrate tax compliance and will submit more information than is currently required on service companies to help HMRC in achieving more effective compliance.
   
   The Trust expects this change to be implemented by January 2013.
   
   
   
4. In addition to the quarterly updates we will receive from the Executive we will request a comprehensive, external, follow-up review in 12 months’ time to confirm that these and any other recommendations made by Deloitte and BBC Internal Audit are being addressed effectively.