The intermediaries legislation (IR35) applies where an individual (the worker) personally performs services for another person (the client), pursuant to arrangements involving a third party (the intermediary). IR35 is engaged where the circumstances are such that if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax and national insurance purposes as an employee of the client. This is what is generally known as 'the hypothetical contract' or 'the assumed contract'.
In the case of Red, White and Green Ltd v HMRC, Mr Holmes appealed against a finding by the First Tier Tribunal (FTT) that his arrangements with ITV concerning his presenting role on This Morning - in which Mr Holmes contracted via an intermediary (being a personal service company) - came within scope of IR35, notwithstanding that Mr Holmes undertakes work for other broadcasting companies and publications.
Mr Holmes argued that control over what is to be done is vital to the assessment of a hypothetical contract. The Upper Tribunal (UT) agreed that this was an important factor, but only to the extent that control is exercised over how, where and when services are to be performed.
In its review of the FTT decision, the UT found the FTT had been entitled to consider the extent to which Mr Holmes was dependent on his ITV income when assessing whether the hypothetical contract was consistent with an employment relationship. The UT felt that the FTT had considered the question of control properly, in particular emphasising that it would be 'career suicide' for Mr Holmes to disagree with key ITV decisions. Furthermore, the UT underlined that an individual can be both engaged under several contracts of (part-time) employment and be self-employed for other engagements.
The UT did acknowledge that the FTT had got it wrong when referring to the existence of a presumption of employment created by the presence of mutuality and control. The error, however, was ultimately immaterial, as the FTT had still carried out the requisite 'balancing exercise' - looking at the detail of the arrangements with ITV - when establishing whether there was a hypothetical employment contract in the circumstances.
This case is consistent with previous decisions regarding the application of IR35 to presenters. It is a helpful reminder of the factors that will be taken into account in the assessment of employment status for tax purposes and the application of IR35, particularly noting the fact that a 'worker' undertakes other work for different clients does not preclude a finding that IR35 applies. It is the arrangements between the worker and the client in each individual case which is relevant. It is possible for a person to be self-employed for the purposes of employment rights (for example, Mr Holmes did not qualify for benefits such as sick pay), whilst being 'employed' for the purposes of IR35.