Earlier this week the news broke that well-known TV and radio presenter, Eamonn Holmes, was defeated by HMRC in an IR35 Tax Tribunal that, according to reports, carries a tax liability of around £250,000.
The case, which was first heard around 18 months ago in June 2018, relates to the services Mr Holmes’ company, ‘Red, Green and White Limited’ provided for ITV on the ‘This Morning’ breakfast show in the 2011/12 and 2014/15 tax years.
HMRC’s argument was that the broadcasting work carried out by Mr Holmes reflected a service of employment, not self-employment. Judge Harriet Morgan was inclined to agree. She concluded that “sufficient mutual obligation” existed, indicating that there was an obligation for ITV to provide work and for Mr Holmes to accept it.
It was also decided that ITV exercised a “sufficient framework of control” over Mr Holmes, regardless of the “considerable autonomy” he enjoyed when preparing for and presenting This Morning. Working under the ‘Control’ of a client and the presence of Mutuality of Obligation (MoO) both point towards an employer-employee relationship, suggesting that a contract belongs inside IR35.
While we await the full judgment to be published, which will contain further information regarding the verdict, there are a number of conclusions we can draw from what is a rare IR35 Tribunal victory for HMRC.
IR35 compliance is crucial
That Mr Holmes has been found guilty of non-compliance could ultimately cost him hundreds of thousands of pounds.
As Judge Morgan explained to Contractor Calculator, it seems unlikely that Eamonn Holmes set out to break the rules: “Mr Holmes has a forceful personality and his passion for his presenting and journalistic work was readily apparent. In that context, I find it unsurprising that Mr Holmes would want to engage others to organise and deal with the legal and other details of his engagements for him so that he can focus on what really interests him, namely, his presenting and journalistic work.”
Deliberate or not, HMRC takes non-compliance very seriously. Contractors, recruitment agencies and end-clients must bear this in mind when determining IR35 status.
HMRC wants to prove a point ahead of IR35 reform
With private sector IR35 reform approaching rapidly, HMRC’s victory could not have come at a better time for the taxman who, one might argue, is hoping to make the headlines with this win.
After opening up enquiries into around 100 BBC journalists in 2018, it’s no secret that the tax office has its sights set on high-profile broadcasters, with Eamonn Holmes the latest household name to have been investigated.
However, you might recall that ITV host Lorraine Kelly and Talksport presenter Paul Hawksbee both won their respective battles with HMRC in the past 12 months. It’s also worth noting that HMRC has won just three IR35 tribunals outright in the seventeen it has been involved in since 2010.
In other words, Mr Holmes’ defeat doesn’t mean other freelance broadcasters are also inside IR35, nor does it have wider-reaching implications for the contracting community for that matter.
Contractors must not panic, nor should private sector firms
Following on from the previous point, Mr Holmes’ tribunal was “not a typical IR35 case”, as our
CEO, Seb Maley, explained to Recruiter magazine. What Seb means is that the working relationship Mr Holmes held with ITV during the periods investigated is likely to be quite different from the vast majority of other contractor’s engagements.
Many outside IR35 contracts, for example, contain a legitimate right of substitution - something which, at this stage, we’re unsure of whether Mr Holmes had. Certainly for Eamonn Holmes, sending a replacement to present ‘This Morning’ is not straightforward. Last year, this was the case for Lorraine Kelly, who the judges unsurprisingly decided provided a Personal Service when working on the ‘Lorraine’ show. Even so, Ms Kelly was deemed outside IR35.
Given most contractors will not encounter these (and many other) problems, Mr Holmes’ case must not frighten private sector firms into panicking and needlessly placing independent workers inside IR35 when reform is introduced.
By avoiding panicked and knee-jerk IR35 decisions, contractors, agencies and end-clients can continue enjoying the benefits of compliantly operating outside IR35 after 6th April.
Ask away! One of our team will get back to you!