IR35 Update - High Profile Cases Involving Two Media Personalities

It seeks to ensure that those individuals who use personal service companies, or other intermediaries including partnership vehicles and who are regarded by HMRC for tax purposes as an employee but for the presence of the intermediary, pay employment taxes and national insurance contributions.

There have been two recently reported decisions from the First Tier Tax Tribunal in recent weeks involving Gary Lineker, a well-known sports broadcaster; and from the Upper Tax Tribunal involving TV presenter Eamonn Holmes, which have arrived at different outcomes for the personalities involved.

IR35 Rules Did Not Apply to Gary Lineker's Services to the BBC

In Lineker & Bux (trading as Gary Lineker Media) v HMRC [2023] UKFTT 340 (TC), the First-tier Tribunal determined that the IR35 rules did not apply to a presenter's (GL) services to the BBC and BT Sport (clients) under contracts between the clients and GL's partnership because GL signed the contracts in his capacity as partner of his partnership.

The First-tier Tribunal has held that the IR35 rules did not apply to the provision of a presenter's (GL) services to the BBC and BT Sport because GL directly contracted with them by signing the relevant contracts in his capacity as partner of his general partnership (GLM).

The purpose of the IR35 rules is to prevent tax and NICs avoidance by interposing an intermediary between a client and worker. Accordingly, for the rules to apply, the worker must personally perform (or be obliged personally to perform) services for a client "not under a contract between the client and worker but under arrangements involving a third party" (a prescribed type of company or partnership, or an individual) (section 49(1)(b), ITEPA 2003).

In this case, the BBC insisted that GL provide his services through a partnership rather than as a sole trader. The BBC drafted a partnership agreement that was entered into by GL and DL. HMRC accepted that the partnership agreement was not a sham. Partnership accounts were drawn up and partnership and individual tax returns properly filed for the relevant tax years. The tribunal determined that GLM was a partnership under the Partnership Act 1890 and that, as expressly envisaged by the IR35 rules, partnerships could be intermediaries.

However the tribunal determined that, the effect of section 5 of the Partnership Act 1890 is that each partner acting within authority, acts as both principal and agent, when signing the contracts, GL did so as principal. Accordingly, GL contracted directly with the BBC and BT Sport and therefore there was no intermediary for the purposes of IR35.

This is the first time the 'direct contract' argument has been raised in an IR35 appeal (previous appeals have involved corporate intermediaries). Coupled with the amounts at stake (particularly employer NICs) and HMRC likely being out of time to seek recovery from the BBC and BT Sport, it is not surprising that it has been reported that HMRC is considering an appeal.

TV Presenter Was Working Under Hypothetical Employment Contract for Tax Purposes

In the second case involving TV presenter Eamonn Holmes it was held on the facts by the Upper Tax Tribunal that an employment relationship had been established despite other activities carried out by the Presenter as an independent contractor. However in this case a personal service company was used as the intermediary.

In Red, White and Green Ltd v HMRC [2023] UKUT 00083 (TCC), the Upper Tribunal upheld the First-Tier Tribunal's decision that a presenter would have been in an employment relationship under the IR35 hypothetical contract despite his performance of other activities as an independent contractor.

Upholding the First-tier Tribunal's (FTT) decision) it was held that the presenter providing services to ITV through a personal service company, despite his other activities as an independent contractor amounted to an employment relationship.

In addition to his work for ITV, the presenter performed for other TV and radio companies and wrote columns for two publications.

The FTT had held that, in his relationship with ITV, the obligation to provide and accept work gave rise to sufficient mutuality of obligation, that a "sufficient framework of control" existed, despite the substantial autonomy enjoyed by the presenter, and that the other provisions of the hypothetical contract were consistent with an employment relationship.

The UT referred to HMRC v Atholl Productions Ltd [2022] EWCA Civ 501 as authority for the proposition that an individual can be both engaged under several contracts of (part-time) employment and be self-employed for other engagements, and noted that the FTT had been entitled to take into account the extent to which the presenter was dependent on his income from ITV.

The UT rejected the taxpayer's argument that, in cases such as this, control over what is to be done is paramount. While important, the UT considered that control over how, where and when services are to be performed remain relevant. Accordingly, the FTT had properly considered control and its findings, in particular that it would be "career suicide" for the presenter to disagree with key ITV decisions and that although the contract did not include a right for ITV to deploy the presenter to other programs, he was required to carry out promotional work, evidenced that control. The UT noted that, while the FTT had misdirected itself when referring to the existence of a presumption of employment created by the presence of mutuality and control (this presumption had been rejected in Atholl), that error was not material because the FTT had nonetheless carried out the required 'balancing exercise'. The UT rejected all other criticisms of the decision including to give little weight to the absence of certain employee benefits, such as sick pay.

Where contractors continue to use intermediaries as a vehicle to provide their professional services, careful consideration is still required. Both cases highlight the fact that HMRC may pursue claims for unpaid taxes and national insurance contributions many years after the income has been earned.

For further advice please contact Michael Delaney, a Partner in our Employment Law team on 07909 912 564, or complete the form below.