The BBC’s mishandling of its use of personal service companies has caused misery and hardship for those affected and has risked bringing the BBC into disrepute.
Its approach has been muddled and chaotic, and its communication with those affected has been unacceptably poor.
The BBC has apologised to people affected by its policy changes and its approach to implementing government reforms and is now trying to reach a settlement with HM Revenue & Customs for outstanding tax claims, but this is taking longer than expected.
We cautiously welcome the BBC’s commitment to helping those affected, but admitting responsibility after the event is not sufficient without taking effective steps to resolve the situation.
The BBC needs to get a better grip of its management of its freelancer workforce if it is to repair its relationship with TV and radio presenters and restore its reputation.
“The BBC has serious work to do if it is to rebuild trust following what was a damagingly incoherent approach to hiring freelancers.
“The BBC’s failure to properly manage its use of personal service companies has had a devastating effect on individuals and revealed significant weaknesses in the Corporation’s processes.
“The lack of clear accountability at senior level for the BBC’s policy on PSCs, and the BBC’s poor communication with freelancers about the implications of that policy, are particularly troubling.
“Apologising is not enough. The BBC has committed to helping those affected: we expect to see evidence both that it has done so and that it is taking meaningful action to prevent such distressing problems arising in future.”
Conclusions and recommendations
The BBC’s approach to hiring freelancers has been fractured, chaotic and muddled. Since 2000, the BBC has made various changes to its policy towards, and contractual methods used for, hiring freelancers. From 2008, it introduced a policy of only hiring freelance presenters in longer-term or higher value roles through PSCs. HMRC told us that it “had concerns about the tax treatment of some BBC presenters for some considerable time” going back to around 2004. In response to our inquiry into off-payroll working in the public sector in 2012, in November 2013 the BBC adopted a new policy for freelance television and radio news presenters under which it offered those it assessed as employed for tax purposes a new type of on-air talent employment contract. In contrast, its policy for other freelance radio presenters remained unchanged. The implementation of these policy changes has often rested with local managers, resulting in differences in how freelancers are treated. We heard of cases of people working in the same job but hired through different contract structures and consequently paying different amounts of tax and national insurance. There may be justifiable reasons for these differences, but we found no sense of transparency or clarity about the sorts of contracts the BBC put people on. The BBC intends to simplify arrangements by eventually replacing on-air talent contracts with standard staff contracts.
Recommendation: The BBC should write to us by June 2019 with clear plans for making the arrangements in this area simpler, clearer and more consistent.
We are shocked that the BBC is unable to confirm whether its early PSC policy was discussed at an appropriately senior level. As part of our previous inquiry into off-payroll arrangements in the public sector in 2012, we were concerned that the use of PSCs within government was not subject to sufficient levels of challenge. Unfortunately, it seems that, to some extent, this lack of scrutiny persists. We are seriously concerned that the BBC cannot provide us with sufficient assurance that its policy changes relating to its historic use of PSCs, affecting a key and operationally important part of the BBC’s workforce, were adequately discussed at a senior management level. The BBC was able to find minutes of executive meetings but there is no evidence that policies and issues relating to PSCs were discussed. The BBC told us that, since the abolition of the BBC Trust in April 2017, the Executive Board and Unitary Board have extensively dealt with PSC policies.
Recommendation: The BBC should write to us by June 2019 to set out how it intends to ensure that it will exercise proper governance over key operational changes in the future.
We find it unacceptable that the BBC did not fully explain to individuals the impact its PSCs policy would have them. Before 2013, the BBC only hired freelance presenters in longer-term or higher paid roles through a PSC in order to transfer the tax risk, and potential associated costs, from itself to the PSC. This policy required individuals to set up a PSC if they did not already have one. The BBC told affected individuals to seek independent financial advice, but it failed to spell out to them their PSC's tax responsibilities or the risks they were facing from HMRC if they got their tax payments wrong. There was wide variation in the quality of the conversations held by BBC line managers with those affected and the information that they were provided as a result. From April 2017, the BBC began to do more to explain the impact of the government's changes to responsibilities for assessing an individual's employment status, communicating with agents' groups, running seminars and undertaking presentations. The BBC has admitted some conversations between local line managers and individuals in 2017 were still not good enough, partly due to the unexpected numbers of individuals it had to deal with. But the BBC’s lack of understanding about the numbers of individuals is unacceptable in and of itself. Since April 2017, the BBC has used HMRC’s new Check Employment Status for Tax (CEST) tool to assess the status of its freelancers. The BBC and other public sector bodies had significantly less time than the private sector has subsequently been given to prepare for the changes to responsibilities for assessing an individual's employment status. The BBC told us that results from CEST impacted an unexpected number of people, with 92% of 663 on-air freelancers between August 2017 and June 2018 assessed as 'employed for tax purposes'. This was in stark contrast to the BBC’s previous assessment in which most freelancers had been deemed as self-employed. It also told us that it had taken steps to improve communications with the individuals concerned, but it could provide no assurance on how successful its actions had been.
Recommendation: The BBC should write to us by June 2019 setting out how it will gain assurance that its efforts to improve its communication with affected individuals have been successful.
Recommendation: In the same letter, the BBC should also outline how it is monitoring the numbers of people assessed with a particular tax status.
The BBC has a long way still to go to repair its relationship with those badly affected by its mismanagement of the changes in responsibility for assessing the tax status of those it hired through PSCs introduced in April 2017. The impact of changes in 2017 in determining the tax status of those hired through PSCs has caused some individuals, who have been loyal to the corporation for many years, great stress and financial hardship. This is partly because the BBC began in August 2017 to deduct on-going income tax and national insurance from the amount they paid individuals, while simultaneously also deducting the amount of tax previously paid in advance by the BBC on their behalf for April to July 2017. Some people are also concerned that they are now more likely to be investigated by HMRC because since April 2017 the BBC has started to treat them as employed for tax purposes when they were treated before this as self-employed. The BBC estimated in May 2018 that 300 individuals hired through PSCs warranted further investigation because their tax status was at risk of being challenged by HMRC. The BBC has recently started to provide some low level financial assistance to individuals paid less than £45,000 a year and has set up a mediation process to handle individual cases. The BBC has paused this process while it seeks to agree, by the end of March 2019, a settlement with HMRC for outstanding tax claims. The BBC has not yet set out how it intends to address the issue of the potential loss of employment benefits in cases where people on staff contracts were forced to become freelancers and set up a PSC.
Recommendation: The BBC should write to us as soon as it has reached a settlement with HMRC, providing details of this settlement, or, if such a settlement has not proved possible, details of its plans for resolving individuals' cases. This should also include an update on the status of the mediation process.
Recommendation: The BBC should write to us, by June 2019, outlining how it plans to assess the potential loss of employment benefits to individuals, and the progress made so far in the number of people assessed.