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HMRC suffer another loss at Hawksbee Case

Hawksbee wins IR35 case despite a lack of substitution, proving further that CEST is not fit for purpose

Paul Hawksbee a well-known presenter on the Talksport radio station recently appealed against an IR35 decision successfully. The decision in Mr Hawksbee’s case completes the ‘hat-trick’ of losses suffered by HMRC at recent tribunals following the decisions in the cases of Lorraine Kelly and Kaye Adams.

Mr Hawksbee had presented for Talksport for 18 years, but the appeal focused on two contracts: 1st January 2012 to 31st December 2013 and 1st January 2014 to 31st December 2015.

The arguments in this case followed the authorities that we are all too familiar with; personal service, control, and mutuality of obligation (MOO). Other areas considered by the judge that played a part in the decision making were financial risk and employment benefits (or lack thereof).

HMRC argued that all three key status tests pointed towards employment: there was a requirement for personal service, there was mutuality of obligation and Mr Hawksbee was sufficiently controlled by Talksport. Mr Hawksbee did not dispute that his personal service was required and that there was no right of substitution, although those familiar with his radio programme will know that other presenters stand in for him when he is not available.

In respect of control, the Judge stated that ‘certain facets of control are not indicative as they apply to employees and non-employees alike’, although he went on to decide that in respect of the format and content of the show that ‘the ultimate right of control in this respect, which the authorities indicate is more important, lies with Talksport’.

Mutuality of obligation was a key fact in this case which is interestingly absent in HMRC’s CEST tool. Whilst the judge found that there was a mutuality of obligation, he felt it was not sufficient enough to create an employment relationship as there was no obligation on Talksport to provide work.

The Judge stated ‘looking solely at mutuality and control, we consider that the absence of obligation on Talksport to provide work and the narrowness of the contracted services point on balance towards a contract for services rather than employment, but not decisively so.  It is necessary in addition to take into account all of the factors considered in relation to “the third condition” to obtain a complete picture’.

The judge concluded that, despite the fact Mr Hawksbee had presented at Talksport for 18 years, he was not part and parcel of the organisation; ‘the successive renewals of the two-year contracts over that period were in no way guaranteed’.

The judge added that you should not look at certain factors in isolation and that the whole picture needed to be considered when reaching a decision. He summarised the position as he saw it:

  1. No obligation on Talksport to provide work.
  2. Controlled services largely restricted to delivering the show.
  3. No equivalent rights to holiday, sick pay, pensions or paternity leave.
  4. No provisions regarding medicals, training etc.
  5. A payment obligation restricted to a fee for each show delivered, with no retainer or bonus.
  6. An individual who, while clearly synonymous with the show, is not part and parcel of the Talksport organisation.

Based on the above the Judge decided that the relationship in his view was not one of employment but was a contract for services and therefore outside of IR35. As with the Lorraine Kelly and Kaye Adams’ cases, if this case had been entered into HMRC’s CEST tool (which has been largely criticised for its over-reliance on the substitution test) then it would almost certainly have been deemed inside of IR35.

What was especially interesting about this case is that in respect of the decision, the tribunal was split with Charles Baker dissenting from Judge, Thomas Scott's, leading judgment. This decision clearly demonstrates exactly how difficult/subjective IR35 decisions can be which does not bode well for the contractors who will be subject to the private sector reform commencing in 2020 when appealing an inside IR35 decision made by an end client.

Once again it demonstrates that HMRC, whilst stating that they consider the whole picture when reaching IR35 decisions, clearly focus on certain aspects that they believe suit their arguments whilst ignoring those that they believe do not. This is why it is important that HMRC decisions are challenged and that contractors appeal any decision that they disagree with, as in the majority of cases HMRC’s decision proves to be wrong.

If you would like to check your own IR35 status, our experienced IR35 specialists can provide a IR35 Contract Assessment, or Full IR35 Contract Review and return it within 5 working days (faster turnaround services are available).
By:Nigel Nordone

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