Tim Palmer looks at some recent IR35 cases and outlines what might be learned from them.
The outcome and content of tax cases are very important to assist future tax planning in the area of IR35 (i.e., the ‘intermediaries’ rules for workers’ services for employment income purposes).
This article summarises some recent IR35 cases.
Little Piece of Paradise Ltd v HMRC (2021) UKTT 369 TC
The ex-Sky Sports TV presenter Dave Clark lost his IR35 case against HMRC.
Dave Clark worked for Sky on its darts coverage, as a freelance TV presenter, via his personal service company, Little Piece of Paradise Ltd.
HMRC argued that without his company if he had worked directly for Sky TV, he would have been an employee of Sky.
His company was paid an annual fee of £150,000 by Sky for providing his services. The fee was fixed and was always divided into 12 monthly payments of £12,500 per month, akin to the payment of a retainer. He was restricted by his contracts to only work for Sky.
The guidance and format of his TV presentations were decided by Sky. Sky chose the darts events and he had to present them. He was like an employee with a fixed-term contract with no element of personal financial risk. The judge noted all HMRC’s comments and arguments and agreed with them.
The judge held that the engagement should be treated as a deemed employment and IR35 applied.
Basic Broadcasting Ltd v HMRC (2022) UKFTT 48 TC
The TV presenter and broadcaster Adrian Chiles won his IR35 case against HMRC. It was held that he was not a ‘deemed employee’ of ITV or BBC. The judge found that he was “in business on his own account” and that he would have been self-employed; hence IR35 did not apply.
Mr Chiles was somewhat of a maverick; the majority of his shows were live, and he controlled his own content and delivery. He had many different clients. In the period 1996 to 2019, he contracted with over 100 different third parties.
He paid 15% of his income, relating to his bookings, to his management company in a longstanding business relationship. He sometimes took on projects that did not bear fruit. There was indeed an element of financial risk.
HMRC’s IR35 challenge was dismissed, and Basic Broadcasting Ltd won its appeal.
S&L Barnes Limited v HMRC (2023) UKFTT 42 TC
The ex-rugby player and Sky TV commentator, Stuart Barnes, recently won his IR35 case against HMRC, relating to a disputed tax and National Insurance contributions bill of approximately £700,000.
Mr Barnes worked as a commentator for Sky TV via his personal services company, S&L Barnes Ltd (SLB). HMRC had alleged that his company’s engagement with Sky TV amounted to a deemed employment and was caught by IR35.
His company’s contract with Sky accounted only for approximately 60% of his company’s total income on average and was just one part of the income from his brand.
The appellant’s counsel asserted that Mr Barnes was “in business on his own account”. Mr Barnes provided his expert opinion on national and international rugby as a freelance rugby commentator, expert pundit, journalist and author. He profited from the sound management of his business via the efficient use of his time.
Sky TV did not control what Mr Barnes said. The TV company engaged him to be ‘the voice of rugby’ and to provide his unique expertise and insight into the game.
Judge Poon accepted the appeal and stated: “I conclude that the relevant contracts would not have been contracts of employment for the duration of the relevant period”.
Practical tip
The Stuart Barnes and Adrian Chiles IR35 tax cases are big victories for freelancers, contractors and the engagers of these businesses. These cases prove that personal services companies and partnerships can be engaged in practice outside the scope of the IR35 legislation.
