Stuart Barnes, a former rugby player and sports commentator, has successfully contested a first-tier tax tribunal appeal over a tax bill of nearly £700,000.
The result was announced last week (Tuesday 19th January), though the tribunal took place in July 2022. HMRC was pursuing Barnes for the sum – a total of £695,491.97, comprising £481,364.20 in Income Tax and £214,097.77 in National Insurance Contributions (NICs) – which was accrued between 2013 and 2019, when Barnes commentated for Sky Sports on a freelance basis.
However, Barnes did not work exclusively for the broadcaster during this time, with other work accounting, on average, for around 40% of his limited company’s income over the time period – a fact which was key to the winning of the case.
Case notes summarised in a report from the FT Adviser state that the tribunal found in Barnes’ favour in part due to the fact that he performed his role for several companies, not exclusively for Sky Sports.
This “contributed on average 60% of the appellant’s income, while over £150,000 on average would also be earned from other clients,” and Sky Sports was aware of this.
As well as working for other clients, “the second compelling indicator is the degree of autonomy Mr Barnes had in relation to how he fulfilled his role as a commentator for Sky Sports coverage”, removing the element of control from the client-contractor relationship.
Alongside work carried out for Sky Sports, Barnes also previously worked for the BBC, the Telegraph, and the Times.
While Barnes has won this case, it’s yet another warning sign for contractors that HMRC continues to police IR35 compliance among contractors.
Indeed, the tax office is actively investigating contracts entered into and completed prior to the roll-out of IR35 reform in the private sector (2021) – a period when contractors were liable for IR35.
As such, it’s essential that contractors are protected against retrospective investigations. Holding a comprehensive IR35 insurance policy will cover tax liability in the event of an enquiry and resulting investigation.
While the result of the tribunal is a huge win for Barnes personally, it’s also an important reminder for businesses that contractors can be compliantly engaged outside of the scope of IR35 legislation.
It demonstrates that insisting all contractors operate on the payroll – whether inside IR35 or via umbrella companies – is a needless, not to mention expensive policy to adopt.
And with the outcome of the case reliant on the interpretation of minor details, the result also emphasises that IR35 is defined by many factors, which will vary from one individual to the next. This in particular is worth bearing in mind when determining IR35 status.
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