HMRC has broken its losing streak for IR35 tribunals this week after defeating a trio of BBC presenters at an IR35 appeal. Joanna Gosling, BBC News presenter and journalist, David Eades, presenter for BBC's The World Today, and Tim Willcox, BBC World News presenter, were pursued for a combined tax bill of £920,000, as reported by The Telegraph.
While the decision was a split one – much like that of both Kaye Adams’ and Paul Hawksbee’s IR35 tribunals – it fell in the Treasury’s favour this time.
HMRC’s history of losing IR35 cases in the broadcasting industry
The Treasury has a recent history of losing IR35 tribunals, particularly in the broadcasting industry. A string of HMRC defeats started with the high-profile First-Tier Tribunal of Lorraine Kelly, followed quickly by Loose Women’s Kaye Adams and TalkSPORT’s Paul Hawksbee. All three had common sticking points however; control and mutuality of obligation were highlighted as being blurred due to the nature of the roles the presenters carried out.
Ex-Qdos and current Larsen Howie Head of Tax Andy Vessey ATT said on HMRC’s previous tribunal efforts:
“These rulings highlight that although personal service may be a requirement of the overall contract, and it invariably will be with TV celebrities, provided the other major status factor of control rests in the worker’s favour and coupled with other tests that point towards self-employment for good measure, then IR35 should be comfortably rebuffed.”
“A word of caution, however, to those TV presenters currently under enquiry or waiting for their appeal to be heard by Tribunal that may have believed the cases of Lorraine Kelly, Kaye Adams, and Paul Hawksbee give renewed hope,” he warns. “Lorraine Kelly, in particular, was viewed by Judge Jennifer Dean very much as an entertainer and therefore much more than a presenter. In the Tribunal’s view, ITV was not employing a ‘servant' but rather purchasing a product, namely the brand and individual personality of Lorraine Kelly. She presented herself as a brand and that is what ITV sought when engaging her.”
What caused the BBC presenters to lose the IR35 appeal?
Vessey’s cautioning is even more pertinent now that Gosling, Eades, and Willcox – all ‘brandless’ presenters, so to speak – have lost their IR35 tribunals.
Another high-profile broadcaster to lose their IR35 appeal was Christa Ackroyd, back in February 2018. The distinction between Ackroyd and the others who triumphed at their tribunals boiled down to a long-term contract, a clothing allowance, a huge amount of control by the BBC over her work and no real ability to work with other clients outside of the BBC. The same aspect of control exerted by the BBC over the contractors’ day to day work and freedom to work with others was present in the cases of Gosling, Eades, and Willcox.
Much like Adams’ and Hawksbee’s cases, the three BBC presenters were faced with a split decision by the two tribunal judges over their employment status. However, the recent ruling was decided in HMRC’s favour on the casting vote of Judge Harriet Morgan, who stated that there was: “sufficient mutuality and at least a sufficient framework of control to place the assumed relationships between the BBC and the presenters in the employment field.”
The BBC and IR35
The BBC has become somewhat entangled with IR35 since the public sector reform came into effect as of April 2017. BBC chiefs were held to account by the Public Accounts Committee (PAC) on their use of PSCs and rife blanket IR35 determinations within the organization. The broadcaster was also found to have not properly explained the risks involved in using PSCS to its self-employed, despite admitting that ‘many contractors may have had little choice in their use of limited companies due to the BBC’s contract specifications.’
The PAC’s report read:
‘Before 2013, the BBC only hired freelance presenters in longer-term or higher-paid roles through a PSC in order to transfer the tax risk, and potential associated costs, from itself to the PSC. This policy required individuals to set up a PSC if they did not already have one.’
‘The BBC told affected individuals to seek independent financial advice, but it failed to spell out to them their PSC's tax responsibilities or the risks they were facing from HMRC if they got their tax payments wrong.’
In the cases of Gosling, Eades, and Willcox, the tribunal confirmed that the BBC had left the presenters with very little choice but to provide their services via PSCs, and had indeed failed to warn them of the risks that came with operating through a limited company. It was noted in the case judgment that ‘the BBC was in a unique position and used it to force the presenters into contracting through the PSCs and to accept reductions in pay.’
Joanna Gosling, David Eades, and Tim Willcox on their IR35 ruling
Although the three BBC contractors lost their tribunals, the judges recognised that they fell victim to the national broadcaster’s contractual demands, and were not, in fact, inherent tax evaders.
As reported by ContractorCalculator, they released a joint statement addressing the ruling.
"We are both pleased and relieved to say that the Tribunal has also found that we acted in good faith, dismissing HMRC’s claim that we - or our accountants - were careless about our tax affairs in any way,” they said. “As a result, the Tribunal ruled that HMRC could not pursue its tax demands for a number of the years in question. We are delighted that our accountants were also deemed to have acted in good faith throughout. Given some of these findings, we are considering with our legal advisers whether to appeal."
“We have endured eight years of HMRC investigation and eventual determinations to reach this point on what is clearly a difficult and unclear subject even for judges. It has been a depressing and stressful period for each of us. However, we are grateful that the judgement, in its entirety, shows we have acted in good faith throughout.”
What can contractors affected by IR35 do to protect themselves?
Matt Tyler, ex-Qdos off-payroll specialist and Larsen Howie IR35 Consultancy Manager, urges contractors to make sure they pay attention to their contracts and working practices.
“The result, whilst unfortunate for the presenters in question, really does show the importance of ensuring that due diligence is being carried out,” he says. “Carelessness in dealing with IR35 and HMRC should an enquiry kick off can be quite costly for any party caught in the process. This will only be more important with the changes coming to the private sector in April as end clients and fee-paying entities are going to be on the hook for liabilities.”
Should you want some peace of mind, we offer a full contract review amongst other services to help you prepare for IR35. We’ll give a pass or fail based on the current contract you hold, along with comprehensive comments on how to improve any problem areas. We also offer IR35 investigation representation from our Head of Tax and resident IR35 expert Andy Vessey ATT should it go to tribunal.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.