BBC stars seek to avoid 50% tax rate
According to the press, a number of big names at the BBC have set up companies to channel their 'earnings', saving them from paying the 50% tax rate on salaries over £150,000.
Such arrangements could also save the BBC substantial amounts of employer’s national insurance payments, currently charged at 12.8% of salaries.
Service companies pay a corporation tax of between 21% and28% on their profits, which can then be paid to the presenter as a dividend, taxed, from next April, at a maximum effective rate of 36.11%.
It also sounds too good to be true – the problem is it may not be true. HMRC has law and regulations (IR35) that apply where individuals, who would otherwise be regarded as employees, contract for their services through a company. If the law applies, 95% of the company’s income has to be paid out (or is taxed as if it had been) as remuneration or pension contributions, meaning no real saving.
Date: 8th October, 2009
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