Presenter Eamonn Holmes is reportedly set to appeal his IR35 verdict at the Upper Tier Tribunal (UTT) in a bid to overturn a £250,000 tax bill handed to him earlier this year.
It marks the next chapter in Mr Holmes’ IR35 saga, which started in 2018 when his case was first heard. Two years later, in February 2020, the well known television and radio personality was deemed at a First Tier Tribunal (FTT) to have been wrongly working outside IR35 on ITV’s ‘This Morning’ breakfast show in the 2011/12 and 2014/15 tax years.
Due to what the Judge described as a “sufficient mutual obligation” and “sufficient framework of control” that existed in the engagement, Mr Holmes’ personal service company, ‘Red, Green and White Limited’, was left with an eye-watering tax liability.
However, the celebrity presenter - who has been self-employed for over forty years - maintains “there is nobody more freelance than me” and is clearly determined to challenge the FTT decision.
But does Mr Holmes realistically have any chance of succeeding? And, standing back for a moment, what are the possible wider implications of this IR35 case as we sit just six months from reform in the private sector?
That this case has been escalated to the UTT suggests the presenter’s advisors are of the view their client has a reasonable prospect of success. And despite the FTT’s opinion that Mutuality of Obligation (MOO) and Control were both present, that’s not to say this will necessarily be shared at the UTT.
You only need to cast your mind back to July of this year, when Talksport presenter, Paul Hawksbee, lost his IR35 case at the UTT, after HMRC successfully appealed a FTT decision. This occurred after the Judge disagreed with the FTT’s assessment of Control.
Will we see something similar? Stranger things have happened.
Control, which is one of the three key IR35 status tests, is contentious for many presenters, including Mr Holmes - and it may prove decisive here.
It’s often hotly disputed, because engagers - such as ITV - tend to hold editorial control over programmes, but that doesn’t mean the individual has little or no autonomy over how they deliver their services. As is often the case with IR35, things are rarely black and white. However, because Control wasn’t cut and dried in Mr Holmes’ FTT, this clause is likely to be scrutinised and contested once more.
If Mr Holmes fails to overturn the FTT decision, HMRC’s victory will stand. This, understandably, may concern contractors who in recent years have experienced the tax office’s heavy handed and, in some cases, aggressive policing of IR35 compliance.
Irrespective of the eventual outcome, it’s important to make clear that this is not a typical contractor engagement. As is often the case with presenters subject to IR35 investigations - whether Lorraine Kelly, Christa Ackroyd or, as previously touched on, Paul Hawksbee - there are a number of factors which make them unique arrangements. These considerations range from Personal Service (the right of substitution is a rarity), to the Control that the client may have over how the service is performed.
Traditional contractors, on the other hand, are better placed to legitimately structure their contract and working practices in a way that clearly reflects a contract for service (outside IR35) rather than a contract of service (inside IR35). In other words, a genuine right of substitution is easier to agree upon with the client, who won’t usually hold as much Control over the engagement as ITV does in this scenario.
So regardless of the eventual outcome, it seems highly unlikely that it would set a precedent. Although that’s not to say it wouldn’t give HMRC the confidence to pursue other presenters or contractors who are currently working outside IR35.
Arguably there is more at stake here for HMRC, that has a less than envious IR35 Tribunal record. With the clock ticking towards IR35 reform in the private sector, the tax office will be desperate to make sure they avoid a high profile defeat, given it would raise further doubt over HMRC’s understanding of the very legislation it created, insists on reforming and ultimately, polices.
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