Footballer turned pundit, Phil Thompson, is the latest victim of HMRC’s agenda against media personalities
Former professional footballer and Sky Sports pundit, Phil Thompson, has lost his appeal against an IR35 case that carried nearly £300,000 in tax liability.
The ruling was reached at a First-Tier Tax Tribunal by tribunal judge Richard Chapman QC on 11 December, following a two-day hearing in March. Thompson has 56 days, or until Monday 5 February, to appeal.
It follows an earlier ruling, from 2019, which also went against the ex-Liverpool footballer. The result is just the latest development in a year which has seen HMRC ramp up IR35 enforcement activity. It’s also yet another reminder that demonstrating compliance remains a priority for businesses and contractors alike going into 2024.
Here, we dive into the details of the Thompson case and offer some insight into what the outcome means...
The case, its context, and where it was lost
Following the end of his playing career, Thompson turned to TV, becoming a mainstay on the Sky Sports programme, Soccer Saturday, between 1994-1998 and again from 2004-2020.
From 2013 onwards, he contracted with Sky through his limited company, PJ & MD Ltd. He was soon under investigation by HMRC over a total liability of £294,306.68 accrued over contracts held between 2013/14 and 2017/18.
He is just one of many media personalities targeted by HMRC for perceived non-compliance, including others engaged by Sky Sports, such as the commentator Alan Parry
. In this case, the tribunal found that Thompson had operated as an employee, rather than as a self-employed individual.
Control present in the contract
Firstly, the tribunal examined the contracts held between Thompson and Sky and identified Control – a hallmark of an inside IR35 engagement.
This was partly because of a comprehensive non-compete clause. If Thompson wanted to provide his services to other businesses – particularly “where such services are the same as or similar” to those provided to Sky – he needed written permission from the Head of Sky Sports.
In short, Sky had “control of Mr Thompson’s activities in appropriate circumstances… to preserve their exclusive exploitation of his services”. The “exclusive” bit is important; this is what made the engagement more like employment than self-employment, according to the tribunal.
As such, there was a “sufficient framework of control” throughout the contract overall, too – including Sky’s “contractual right to decide” where and when the work happened.
Mutuality of Obligation existed
But a contract isn’t “the exclusive record of the terms of the agreement of the parties”, and so the tribunal also looked at working practices – put differently, how the work was carried out day-in-day-out.
The hypothetical contract
implied the services would be “personally performed” by Thompson. While he had the right to provide a substitute, Sky would determine the substitute’s “suitability”. And Thompson had said “he would not dare tell Sky” who the substitute should be, “as it was not his role to do so”.
So – the hypothetical contract and the contract itself were inconsistent. Instead, the tribunal took the view that Mutuality of Obligation
existed between Thompson and Sky.
Ultimately, Sky had the “right to decide when the services were to be provided” and Thompson would act “on a first call basis”, with no “right of refusal” when these requests came in. Effectively, he was obliged to accept the work as and when Sky proposed.
Other factors of note
Other elements contributed to the outcome in the case, like the fees Thompson received. These “were fixed in advance and not dependent upon air time”, and paid “in equal monthly instalments”.
The tribunal took the view that the regularity of the payments looks more like those an employee would receive, and these accounted for “the substantial majority” of PD & MJ Ltd’s earnings; “an average of 80% during” for the periods in question. These were “the main element of Thompson’s professional income”.
What does this result mean?
There are a few key takeaways from this case:
- HMRC’s persistent pursuit of high-profile freelance presenters continues, but this result is in sharp contrast with the tax authority’s loss against Kaye Adams just a few weeks ago. Between them, these cases highlight the complexities inherent in the IR35 legislation – and HMRC’s persistence in tackling perceived non-compliance.
- The headline tax liability (which doesn’t take into account the cost of representation) of almost £300,000 shows just how costly non-compliance can be, both for contractors and businesses, which are now liable for IR35 under the off-payroll working rules.
- Finally, this case – and many others like it – highlights the importance of carrying out well-informed IR35 status determinations from the outset and reassessing these regularly.