The idea is simple: if a person, A, is employed by a company, B, then B has many responsibilities. Amongst those is that making that person redundant can be very expensive. Therefore B might decide that it will engage A on a fixed term self-employed contract, ending just shy of the qualifying date for redundancy. Then another contract can be entered into, either immediately or after a short break.

That idea worked for a while until the Employment Tribunal decided that it was a device to get around redundancy notices and to avoid paying benefits such as holiday pay. The Inland Revenue jumped in and decided that it was also a device to avoid B paying the employer's national insurance contribution (about 10% of salary, depending on which year one looks at). It was decided that, if A worked solely or primarily for B, then B should be considered an employee and not self-employed.

Companies then began telling contractors that they could not employ them directly and that they would have to form, and contract through, a limited company, C. Legally, then, C would be the contractor and A would be labour supplied by C. A would not take a salary, or would take a small salary, and would take dividends instead. Again, HMRC argued that, if C had only one employee, A, and that A was contracted out for full time or almost full time to B, the company should be considered as transparent for tax purposes and A treated as employed. From B's point of view, it could terminate a contract with a company without the penalties of terminating a contract with an individual.

So some people in the position of A formed their "personal service companies" outside the UK and that is where B paid their remuneration to. Some people had multiple revenue streams such as personal appearances, writing newspaper columns, acting gigs, making novelty records... anything to establish that they were not wholly or mainly employed by B. But HMRC argued that these were not sufficient to prevent the wholly or mainly clause applying. Now, as a number of BBC contractors (they like to call themselves "staffers" but contractually that's not so), have found out, HMRC says they should have been taxed as employees of the BBC for years and, as a result, have to raid their piggy banks for tax arrears. The problem that HMRC seem to fail to fully appreciate is that the PSC allowed the BBC to pay staff contracted through the PSCs a lower rate than they otherwise would have done and so all the A's out there do not have over-stuffed piggy banks as a result of what HMRC imagines is squirrelled away bonuses from tax avoidance.

And so it was, the position was settled.

Until 8th November when a case came before the First Tier Tax Tribunal in Birmingham.