Red, White & Green Ltd (RWG), Holmes’ personal service company (PSC) through which he provided most of his presenting services to the likes of ITV and Sky, was first brought to tribunal back in June 2018. Last week, Holmes’ IR35 case was published – albeit with the amounts of both owed tax and Holmes’ rates stripped out.
Holmes lost his IR35 appeal, with the judge ruling in HMRC’s favour that he was indeed a so-called ‘disguised employee’. The amount of tax owed could be as much as £250,000, as reported by the Daily Mail.
Why exactly was Eamonn Holmes classed as inside IR35? We take a deep dive into what was wrong with his contract and working practices to help you avoid the same mistakes.
What was the main status test that Eamonn Holmes failed on?
The IR35 employment status case concerned the application of IR35 to contracts between Holmes’ own personal service company, Red, White and Green Ltd, and ITV between 2011-2012 and 2014-2015.
The decision, as it so often does in these high-profile cases, boiled down to both Mutuality of Obligation (or MOO) and Control. The status tests that helped to get Lorraine Kelly, Kaye Adams, and Paul Hawksbee off the hook are precisely what Eamonn Holmes fell foul of. Judge Morgan commented in the case notes, saying: “I have concluded that there was sufficient mutuality and at least a sufficient framework of control to place the assumed relationship between ITV and Mr Holmes in the employment field.”
Let’s take a closer look at what, exactly, tripped Holmes up.
Eamonn Holmes and Mutuality of Obligation
Mutuality of Obligation can make or break an IR35 tribunal and, unfortunately for Holmes, it played a big part in his inside-IR35 result. Ultimately, his obligation for continued (albeit, not exclusive) service was written into his contract; although it was probably never intended by the parties to be exercised, it’s certainly cost Holmes in the long run.
The tribunal heard how contracts between ITV and RWG would stipulate fixed dates upon which Holmes was expected to provide services to ITV. Additionally, it was written into Holmes’ contract that he would receive payment in full if a show was cancelled and could not be rescheduled, negating any financial risk present (which is a sure-fire sign of genuine self-employment). These terms appeared at odds to the reality of Holmes’ working practices but they weighed heavily when the time came to make a decision on his IR35 appeal, no matter how theoretical.
This is about as straight-forward as it gets when identifying the presence of MOO for both parties in the contract. Despite Holmes’ representatives arguing that the other status tests did not demonstrate an employee-employer relationship – mainly claiming that Holmes carried on many other journalistic activities in his own name as a sole-trader – the presence of MOO was strong enough to swing it.
Eamonn Holmes and Control
In his evidence, Holmes made a point about having ‘control’ over the This Morning show. The First-Tier Tribunal accepted that he had considerable autonomy over the way in which he presented on the live show and that he wasn’t required to attend production meetings or rehearsals.
Many aspects of control that were discussed in the tribunal were synonymous with the presenting profession, making them somewhat contentious. ITV had the ultimate right of editorial control, which is the same for the vast majority of mainstream media. Holmes was also subject to OFCOM guidelines and wasn’t permitted to wear any branded clothing while presenting the show – again, all run-of-the-mill restrictions for a public figure.
However, there were elements of overt control exercised by ITV over Holmes that neither Lorraine Kelly nor Kaye Adams was subject to. The TV company decided who Holmes would interview on the show, and ITV staff researched each interview and gave Holmes a brief beforehand. He was also subject to a number of restrictions that stretched to his own private life, including leisure activities and provisions relating to the state of his health - a nail in the coffin when it comes to employment status.
Eamonn Holmes and the Right to Substitution
Holmes accepted that ITV wanted his services specifically and that he wasn’t permitted to provide a replacement even in theory (which is often how the right to substitution is accepted when considering employment status). If he couldn’t provide his services, it was up to ITV to find someone else to take his place, as an employer would have to.
While there’s certainly a comparison to be made between Kelly and Holmes’ cases in this respect – i.e. they were selling a specific ‘personality’ or ‘brand’ as part of their services, which just happens to be themselves – Kelly did, in fact, supply a substitute on occasion, whom she chose, organised, and paid. In Holmes’ case, the broadcaster specifically wanted his services and stipulated that Holmes’ participation was ‘integral to the programme and a material term of the agreement’.
Despite the evidence that Holmes himself was required and that no substitute would be accepted, his personal service was considered a minor factor due to his reputation as a public figure adding value to ITV’s programming – it was all part of his offering and qualifications, to a certain degree. Still, the distinction between himself and Kelly’s circumstances contributed to the overall decision.
The overall picture of Holmes’ employment status
While the key status tests outlined above are crucial when it comes to making an employment status decision, it’s also the little things – technically known as the minor status tests – that count. The most potent example of this is that Homes enjoyed perks that should only be available to employees; ITV provided a car to take Holmes from his home to the studio on his working days and if he had to do an outside broadcast, the TV company would pay for hotel accommodation and a car, booked directly and paid for by ITV. These should’ve been paid for through his limited company, as a genuine contractor, to remain outside IR35.
This case is a great example of what not to do when it comes to your contract and working practices, but it’s difficult to know where to start when getting ready for the IR35 reform. There are steps you can take, no matter where you sit on the supply chain, to make sure you’re preparing for the changes; contract and working practices reviews are the first port of call. They are key in educating yourself about what the off-payroll rules mean for you, a crucial part of staying on the right side of legislation.
Larsen Howie offers a range of contract and working practices reviews – you can find out which option would be best for you here. We also offer IR35 investigation insurance with representation from Andy Vessey should it go to tribunal, as well as training and consultation for businesses that wish to continue working with their invaluable contractor workforce.
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.