Friday, 5 October 2012


To Be or Not To Be …self-employed at the BBC? That is the expensive conundrum.

For tax purposes, are you an employee or self-employed; or perhaps both?

25,000 lost souls at the BBC and thousands of senior civil-servants are in Limbo (the post-mortem waiting room before God delivers judgement and despatches us to Heaven or Hell) as their Contracts of Employment and Service Companies are scrutinised by HMRC.  This is a very old hot chestnut for tax-planners, the outcome of which depends on the mood of Tax Inspectors and Courts.  What the written contract says hardly matters.

Want to be baffled?  Start here:

What are the stakes? 

FOR YOU - First, will the employer deduct tax (up to 50%) before paying you? Second, will the employer deduct your share of National Insurance, (v. complex but 5% to 10%) before paying you? Third, will the employer deduct a Pension Contribution  (say, 4%) before paying you. There’s not much left is there.

FOR EMPLOYERS – First, they have to pay you monthly, but if you are self-employed they can delay. Second, they pay Employers’ National Insurance (v. complex but 5% to 10%). Third, they might pay into your pension – say, 4%. Fourth, they have a mass of red tape and frightening cash-flow problems – it’s no fun being a boss and running  a wages book for the tax-collectors.

All in all, the tax collectors gain a lot from both Employers and Employees if Self-Employment is ruled out.  BUT, the biggest cost to the Wanna-Be-Self-Employed  is the loss of large expenses deductions in their service-companies, the loss of manoeuvres such as paying themselves a dividend instead of a salary and BIGGEST of all, the loss of the power (legally or not) to divert chunks of income to tax-havens – and pay no tax at all – and have money off-shore to invest or spend far from the madding crowd and piercing gaze of the Inland Revenue Service.

POSH PEOPLE ONLY SHOULD APPLY FOR REFUNDS – Service Companies conferring self-employment are mostly used by high-earners. Few of the plebs or hoi-polloi can organise them or persuade their employers to comply – particularly via tax-havens.  Most high-earners take top advice on tax-plans and top tax-planners guarantee the outcomes of their schemes. If your plans are unravelling, work out the difference in costs and claim from your advisors – in turn they will claim from their Professional Indemnity Insurance policy. 

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