The latest IT Contractor News from Contract Eye

The mainstream press has expressed its 'shock' as it has been revealed that many BBC personalities - including Jeremy Paxman and Chris Moyles - 'avoid tax' by working via their own limited companies.

According to various Sunday papers, including The Telegraph and The Times, the BBC has advised top presenters to set up their own limited companies to "convince the tax man that they are legitimately working as freelancers".

This revelation will come as no surprise to most IT contractors, many of whom have used the limited company business structure for years, and have had to cope with the complexities of IR35 tax legislation for a decade.

Of course, BBC presenters pay less NI and tax by working via their own personal service companies. Even more so when the new punitive 50% tax rate comes into play in April 2010 for income over £150,000.

By retaining many of its staff as contractors, the BBC itself will not be liable to 12.8% employers national insurance on the significant sums it pays to many of its presenters.

According to The Times, the total tax and NI payable by a presenter on £1m per year (such as Jeremy Paxman), would amount to £627,000 if they were classed as a normal BBC 'employee', compared to a total tax bill of £520,100 in corporation and dividend tax via the limited company structure.

Amusingly, a BBC spokesman told the Telegraph:

"Some individuals working as freelancers in broadcasting, and a range of other sectors, like IT, set up service companies which deal with their tax arrangements and this is perfectly lawful."

It would be interesting to see how HMRC would view the IR35 status of these high profile individuals!