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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.

I have to say the thought of the impact of circumventing the law, eg by gaining a right of substitution, could be fun – anyone else fancy 'Friday Night with Jeremy Paxman' or 'University Challenge' with Jonathan Ross!
 
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this blog with Cathy you can call her on 01908 605552.

 

 

Date: 8th October, 2009
Author: Cathy Corns

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