Two highly paid full-time BBC executives are able to avoid income tax because they are having their earnings paid into service companies.
The employees, each earning more than £100,000 annually, have been working for the corporation for more than a year and continue to do so. The tax arrangement could save them thousands of pounds, as it allows them to pay corporation tax of 20 per cent, rather than income tax at much higher rates. The revelation will be an embarrassment for the BBC at a time when tax avoidance has been described as “morally repugnant” by George Osborne.
The use of service companies is one of a number of tax avoidance measures that the chancellor vowed to clamp down on in his budget last month. Under rule IR35, individuals using service companies for their earnings should be paying full income tax and national insurance unless they are genuine freelancers with multiple sources of income and without fixed employment.
However, in response to an inquiry from Labour MP David Winnick about the number of BBC employees working full-time and paid more than £100,000 a year, Mark Thompson, the BBC’s director-general, wrote: “We do have two service company arrangements in place for two individuals who have been paid more than £100,000 over the last 12 months, and whose work is now of a continuing nature, but who were both initially contracted on a fixed-term basis.”
Thompson would not reveal their identities, but said that they were not in a “senior management position”. He said the corporation was “reviewing both of these arrangements” to “ensure that their contractual status reflects their most recent responsibilities”. He added: “We do not engage any other service companies on a continuous basis.”
