BBC case brings role of third parties in tribunal proceedings under scrutiny

12 October 2016

Andrew Hubbard

Given the public interest in the financial affairs of well-known people it is hardly surprising that the news that over 100 BBC personalities are under HMRC enquiry over their tax arrangements generated front page headlines. We in this briefing don't follow the cult of personality and have no interest in commenting on specific cases, but we are intrigued by the wider issues arising out of this development.

So first a bit of context. The information emerged at a preliminary stage in a tax tribunal hearing. As is well-known, a number of people who appear on the BBC are not employed directly by the corporation but provide their services through their own personal service companies. HMRC believe that the IR35 rules should have been applied by those service companies - in other words that PAYE and NIC should have been applied. Ultimately that is what the tribunal will have to decide. The key point is that if there is a PAYE and NIC liability it should be accounted for by the service companies and not the BBC itself. So whatever the outcome of the case it will have no effect on the BBC's tax position. 

However, in order to determine whether or not IR35 applies the tribunal will have to look at the working arrangements between the individual and the BBC. Evidence about this can only be provided by those in the BBC responsible for setting up and monitoring those arrangements. So this preliminary hearing was essentially about the way in which that evidence was to be given by BBC staff. 

The more you think about it the odder the situation becomes. In any IR35 enquiry the organisation to whom the services of the individual are provided is not a party to the dispute. The outcome of the IR35 enquiry has no effect on its tax position, yet the decision may well have very significant implications for its commercial operations and the way that it engages people. At one and the same time it is legally disinterested and commercially extremely interested. 

The IR35 legislation does not deal with this anomaly, hence the dispute over evidence at the tribunal hearing. In fact the problem is wider. Any tax dispute where the outcome may affect more than one party, such as employment status cases, can create similar tensions.

There is also a wider issue. The BBC wanted to be involved in the hearing without actually being a party to the dispute. HMRC and the tribunal were very concerned this could create a difficult precedent. It doesn't take much imagination to see why. Imagine a case where a household name was involved in a dispute with HMRC over his or her participation in an avoidance scheme. A campaigning organisation might well be interested in the chance to intervene and make its own arguments about why the individual should not be allowed to "get away with it". However strong, or justified those views might be, it cannot be right that those who are not party to a tax dispute can have a role in determining its outcome. There are some very narrow circumstances in which public interest bodies can intervene in decisions in some of the higher courts, but those situations are very different to individual tax disputes.

As ever - it is what lies behind the headlines where the real interest is to be found.

If you would like any more information on this issue please contact Andrew Hubbard or your usual RSM contact.



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