Big trouble in TV tax land
- 11 Oct 2018
The scandal over stars’ taxes is a symptom of widespread confusion about self-employment
£2 million. £147,000. £300,000. Just a few of the figures bandied about in the ongoing TV presenter tax scandal. Eye-watering tax bills. Of course, for the average person on the street it may be a little difficult to feel too bad for the tax troubles of someone like Eamon Holmes, who is thought to earn £700,000 a year – even if he is now facing a tax bill of up to £2 million.
The thing is though: the status of the self-employed is something that affects the ‘white van man’ as much as the limited company newsman (like Eamonn Holmes, who was this week drawn into the IR35 web). It affects everyone from freelance graphic designers to accountants and drivers in the gig economy. At the moment, the tax and employment laws for the self-employed are absurdly complex and it is all too easy for people to fall foul of them.
This week, there were two new developments in the tax scandal. First, it emerged ITV star Eamonn Holmes is in the middle of a legal battle with HMRC over his tax status. According to Holmes, the government tax authority is challenging his use of a personal services company to receive his pay. HMRC is challenging him over the last seven years, which, according to Holmes, means he could face a bill of up to £2 million.
Second, Dame Jenni Murray, presenter of the BBC’s Woman’s Hour, is also apparently heading for a tax tribunal showdown with HMRC. Like Holmes, Murray is said to be confronting HMRC over her use of a personal services company. Although Murray is now a PAYE employee of the BBC, HMRC is apparently making historical claims over her use of Jay Mo Broadcasting Ltd.
In both cases, the figures being discussed will be eye-watering, but the point is the same. The UK’s tax and employment law simply has not evolved with the changing labour market. Today, it’s a-list celebrities being hauled up for their old tax bills, but every other week, it’s another claim about workers being wrongly treated as self-employed by unscrupulous bosses – or hard-working consultants being dragged through the courts because HMRC wrongly believes they’re falsely self-employed. Just look at their track record in the tax tribunal, where they have lost four of the five cases brought against them just this year.
This is symptomatic of a wider problem: the UK’s approach to self-employed status simply does not work.
At present, although the UK has legal definitions of both employee and worker status, we still have no statutory definition of self-employment. It’s this that allows a small number of unscrupulous gig economy employers to falsely treat their workers as self-employed. And it’s this (and the complex, ineffectual system HMRC currently uses to test self-employment) that means so many legitimately self-employed people are dragged through unnecessary and costly employment tribunals.
To clear the confusion and stop so many people falling through the gaps in the system, IPSE proposes introducing a statutory definition of self-employment into law. And not only that: creating a clearer, simpler tax system tied to that definition. At the moment, one of the most pernicious results of the confusion about self-employed status is IR35, an excessively complex tax law that essentially allows HMRC to tax self-employed people like employees – without any of the rights.
Last April, the government made hugely damaging changes to how IR35 works in the public sector, shifting responsibility for deciding employment status from the self-employed themselves to their engagers. Because the system is so complex, the engagers simply played it safe, declaring all their contractors caught by IR35. In response, there were mass contractor walkouts: many switched over to the private sector and a few even gave up self-employment altogether.
Worst of all, recent reports suggest the government is considering extending this disastrous measure to the private sector. At that point, at least you can say the confusion will be cleared up: self-employment just won’t be a viable option for many people.
The government needs to create a simpler, clearer legal and tax system that actually supports and encourages the self-employed. This will raise profile of what good self-employment looks like. A good first step would be scrapping the disastrous changes to IR35. Until the government creates a better system for the self-employed, you can expect more TV tax scandals, more exploitation and more honest, hard-working self-employed people being unfairly dragged through the courts just to decide their employment status.
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