HMRC vs well-known presenters - what IR35 lessons can be learnt?

Despite HMRC’s success in winning the IR35 challenge to presenter and TV celebrity Eamonn Holmes which levelled the score following their loss in the Lorraine Kelly case, they have slipped behind again!

Last month another high profile TV presenter, Kaye Adams, well known from her time on the ITV show Loose Women won her argument on appeal to the Upper Tier Tax Tribunal when her engagement with the BBC on the Kaye Adams Show was found to be outside IR35.

Background

All three of these well-known presenters were working through their own personal services companies and the HMRC challenges came at the time when the status determination was made by their company. Each had a history covering many years, of working as a self-employed journalist or media personality.

At first glance there appears to be little difference between any of these three cases so was Eamonn Holmes just the unlucky one or was there more to it?

Many observers will point to the long-running muddle and confusion inherent in the IR35 regulations and HMRC’s interpretation of them. Others will say that the contractual or working arrangements between the parties were poorly drafted or presented. The answer probably lies somewhere between the two.

What did the Tribunals look at?

Contractors and end clients preparing for the new world of status determinations post 6 April 2021 are likely to have focussed on issues of control, mutuality of obligation, substitution and the so called ‘minor tests’ which include things like financial risk, being part and parcel of the organisation and so on to help them decide the correct employment status.

Only in the Eamonn Holmes case did one of these ‘minor’ tests serve to damage his case – the provision of a car to take him from home to studio and the direct payment of his hotel and accommodation. ITV made the mistake of booking and paying for this directly rather than those expenses being incurred by Holmes’s limited company.

Interestingly what carried considerable weight in Kaye Adams’s successful appeal was the track record she could show of ‘freelance presenting’ prior to the BBC contract she signed. This advantage was not, bizarrely, afforded to Mr Holmes despite the fact that he was able to show something similar.

What did the contracts say?

However, closer inspection of the outcome of each of the three media cases reveals that the contentious issues of mutuality of obligation (MOO), and to a greater extent, that of control, lay at the heart of the judgements.

All three presenters are high profile and their individual personality, onscreen persona and perception by the public were the reasons why they were sought after by the TV companies.

When the individual contracts are examined in detail, subtle differences of form and substance begin to emerge which perhaps start to explain why the outcomes were also different, particularly between Mr Holmes and Ms Kelly, and to a lesser extent, Ms Adams.

Did Mutuality of Obligation (MOO) play a significant part in the decisions?

In Mr Holmes’s case his company’s contract with ITV stipulated fixed dates upon which he was expected to provide his services to ITV. It was also written into the contract that he would receive payment in full if a show was cancelled and could not be rescheduled, thus removing any financial risk to him. The Tribunal decided that with his obligation for continued (albeit not exclusive) service written into his contract there was a clear mutuality of obligation between the parties and that Mr Holmes was working inside IR35.

In the Lorraine Kelly case, the Tribunal found that ITV was obliged to pay Ms Kelly for the services performed and there was an expectation that there would be up to a certain number of her shows each year. However, ITV was not obliged to call on Ms Kelly and the show could have been dropped if ratings fell. Although there was mutuality of obligation, it only amounted to the “irreducible minimum” and the Tax Tribunal did not find it ‘determinative of the issue’.
The issue of MOO in the Ms Adams case was examined according to the contractual arrangement with the BBC in which her production company was required to provide her services as presenter of the Kaye Adams Programme. There was a minimum commitment of 160 programmes with a rolling one -year contract in return for a minimum fee. If the BBC required her services for more than 160 programmes her company would be paid a set additional fee per programme.

Ms Adams’s services were not exclusive to the BBC and the presenter was able to take on other contracts. Because of her history of being ‘in business on her own account’ the Court determined that such a contract was not necessarily a contract of employment even though it provided for a sufficient framework of mutuality and control.

How was the issue of control examined and weighed by the Tribunals?

All three presenters had to pass perhaps one of the most fundamental and important tests imposed by IR35 – that of control.

An examination of the cases shows a contrast between the way in which control was exercised by ITV over Mr Holmes to which neither Ms Kelly nor Ms Adams was subject. It was this control which proved decisive in the Tribunals finding that Mr Holmes was working inside IR35 and that both Ms Kelly and Ms Adams were working outside IR35.

Here are some of the key control differences:

• The TV company decided who Mr Holmes would interview on the This Morning show; ITV staff researched each interview and briefed Mr Holmes beforehand
• Mr Holmes was subject to a number of restrictions that stretched into his own private life including leisure activities and provisions relating to the state of his health – all redolent of an employment status
• Ms Kelly could turn down work and take on projects with other clients; she did not need to obtain ITV’s consent
• Ms Kelly’s TV programme Lorraine was very much her show and she had a major say in its content, production and presentation
• Although unable to send a substitute Ms Kelly was able to nominate stand-in or co-presenters for her show in her absence which she did on several occasions
• Under the agreement between the BBC and Ms Adams although the BBC had the right to determine its form and content, in practice it was prepared to give Ms Adams a high degree of autonomy so that she effectively determined the content of the show and the direction each episode would take whilst being broadcast

What lessons should be learned?

Hopefully the lessons to be learned from these cases by freelancers, their agencies and end clients, should be an appreciation that if a status dispute comes to a Tax Tribunal, the very detail and nuances of contracts and working practices should have been thoroughly thought through, examined and agreed at the outset.

IR35 is a complex piece of tax legislation and it is much easier to present evidence to prove an outside-IR35 argument if advice is taken, or a contract review is conducted at the very outset or before the start of a new or renewing assignment.

If you’re an existing PayStream PSC client then don’t worry because IR35 reviews are included in your service, simply contact your dedicated accounts team for more info.