Former BBC presenter Christa Ackroyd is facing a tax bill of almost £420,000 after Her Majesty's Revenue and Customs (HMRC) won a landmark battle, which could have wider implications for freelancers.
Ackroyd was one of a number of people employed by the BBC through personal service companies.
In his Budget last October, chancellor Philip Hammond indicated he was targeting ‘disguised employment’ within the private sector, which could net the government around £1 billion in unpaid taxes.
The potential loophole was initially identified by previous chancellor George Osborne in his 2016 Budget.
HMRC has become increasingly concerned that personal services companies, used by the likes of IT contractors, consultants and journalists, have become vehicles to avoid paying personal tax and national insurance.
It is believed that at least 100 past and current BBC presenters are being investigated for alleged tax avoidance through personal service companies. Fiona Bruce and Jeremy Paxman are among the BBC stars who have used these companies to cover their payments.
In its Ackroyd ruling, the tax tribunal in Leeds said that while this was not a test case, ‘we understand that the present appeal is one of a number of other appeals involving television presenters and personal service companies.’
The tribunal stressed that HMRC had ‘never suggested’ Ackroyd was a tax cheat or had acted dishonestly.
The BBC said the use of personal service companies was 'entirely legitimate and common practice' across the industry.
'The BBC was not party to this case, and as was standard industry practice at the time the individual was engaged as a freelancer in 2001 and paid via their existing company,' a BBC spokesperson said.
'Until last year it was for individuals with service companies rather than those engaging them to determine their status for tax purposes. The use of personal service companies is entirely legitimate and common practice across the industry as it provides flexibility for both individuals and organisations.
'An independent review conducted in 2012 found that there was no evidence that the BBC had attempted to avoid income tax or NIC by contracting in this way.'
Ackroyd presented Look North in Yorkshire from 2001 to 2013 and was paid through her personal service company Christa Ackroyd Media Ltd (CAM).
HMRC claimed that as an employee of CAM, the company was liable for income tax and national insurance payments. Ackroyd disputed this, arguing she was a self-employed contractor and therefore CAM had no further liability.
Ackroyd said the ruling had brought an end to ‘five horrendous years of innuendo and gossip’ around her financial affairs.