TalkSPORT radio presenter, Paul Hawksbee, has won his IR35 appeal at the First-tier Tax Tribunal - but only just. Judge Thomas Scott and Tribunal member Charles Baker differed in their opinions so it was left to the Judge to exercise his casting vote in favour of the taxpayer.
Paul Hawksbee is a talented comedy scriptwriter but is probably best known for his longstanding partnership with Andy Jacobs in presenting the Hawskbee & Jacobs show on TalkSPORT for the last 18 years. In 2001, Hawksbee formed Kickabout Productions Ltd (KPL) and it was through his PSC that he conducted his radio presenting activities to TalkSPORT. HMRC believed that this relationship was caught by IR35 and raised tax and NIC assessments for the three years ended 5th April 2015 totalling just over £143K.
Hawksbee's right of control
The contracts that were in operation during the years under appeal required Hawksbee to present his show for a minimum of 222 days, Monday – Friday between 13:00 – 16:00 at the broadcaster's studios. Therefore, it followed that TalkSPORT controlled where and when the work was carried out but the Tribunal considered this was considerably less significant than control over how and what was done.
OFCOM guidelines, and rules and regulations that applied without discrimination to both employees and non-employees alike was deemed to be of no material assistance as an indicator of whether there was sufficient control for an employment relationship to exist.
The Tribunal broke the ‘how’ aspect of control into three categories:
Practical control during Hawksbee's broadcasts
With the exception of a “dump button”, which enabled broadcasts to be paused, TalkSPORT were unable to control how Hawksbee performed the services. However, the absence of minute-by-minute control which is inherent in a live broadcast was not of itself considered to be a strong indicator one way or the other.
Hawksbee's practical editorial control over content and format pre-broadcast
Other than regulatory and advertising constraints, Hawksbee was free to decide on all material aspects of the show. He was unscripted and chose both the preferred guests and stories or events to include. In short, he chose what to say and how to say it, and had significant creative freedom. In essence, what TalkSPORT were paying for was a show devised and presented by Hawksbee and his co-presenter.
TalkSPORT's ultimate control over Hawksbee's content and format in the event of unresolved dispute
In practice, disagreements between Hawksbee and TalkSPORT in relation to content of a forthcoming show were resolved amicably, with TalkSPORT generally conceding to Hawksbee. However, the Tribunal considered that the hypothetical contract between the parties would have afforded TalkSPORT the ultimate right to decide the issue where there was an impasse.
With regard to the ‘what’ element of control, TalkSPORT’s contractual right was narrow and only extended to the preparation and presentation of the show, with some additional obligations relating to the promotion of the TalkSPORT brand.
Mutuality of obligation (MOO) between Hawksbee and TalkSPORT
Although Hawksbee was obliged to work for at least 222 days a year, under the hypothetical contract TalkSPORT were not obliged to provide work, even though in practice both parties expected the minimum number of shows to go ahead.
Although the bare requirements of MOO existed, a proper employment relationship would typically require an employer to provide work to the employee, not just for the employee to be obliged to do it.
When considering MOO and control together, they pointed towards a contract for services - but not decisively.
Tribunal member Baker disagreed with the Judge’s interpretation of MOO in this case. He took the view that by entering into each agreement, TalkSPORT had already provided the work and no further decision was needed from the broadcaster.
Hawksbee's Personal service
Neither contract provided for a right of substitution, but this was not seen as significantly pointing towards employment either.
The show featured Hawksbee's name and TalkSPORT were paying for his unique expertise and work. It was therefore accepted that Hawksbee’s personal service was a feature of the working relationship.
Although there were restrictions in Hawksbee’s freedom to act as a radio presenter for rival stations, he was not constrained in the ways he habitually earned income from other sources, primarily as a television scriptwriter.
Duration of contracts with TalkSPORT
Each hypothetical contract was for a duration of two years unless terminated early. As a general rule, termination required four months’ notice from either party. These were considered to be neutral terms.
Employee-type benefits, rights and obligations
As they always do and at their own peril, HMRC attempted to dismiss this test but the judge was not having it and regarded the absence of a right to holiday pay, sick pay and pensions etc as a pointer away from employment. However, HMRC’s view did find favour with Tribunal member Baker.
None of the contracts contained any provisions for medicals, training, appraisals, formal disciplinary or grievance procedures. Typically, these are features of an employment relationship and their absence here pointed away from employment.
Basis of payment
For the term of the first contract, KPL were paid £525 per programme and then £575 per programme for the second contract. These fees were paid monthly.
Whilst the contracts referred to a broadcast show lasting three hours, the financial obligations were not dependent on the number of hours Hawksbee worked for TalkSPORT. KPL were not paid a retainer or minimum fee and Hawksbee could not earn any performance-related success fee. These factors were seen as indicative of a contract for services.
HMRC argued that KPL bore no financial risk because there was no realistic possibility of making a loss. Furthermore, KPL had no opportunity to increase its profits through efficient management. At face value this was true but when dealing with a skilled professional such as a presenter, the opportunity to profit is not linked to the management of labour costs and other expenses but rather from a job well done which secures continuous work and enhances an individuals reputation.
KPL were paid a fee per show regardless of how long it took Hawksbee to research and prepare for each programme. The company’s financial risk, therefore, turned on Hawksbee’s ability to do other work and generate opportunities depending on how effectively he managed his time outside the three hours each weekday the show was live. An example of this was when Hawksbee was offered the opportunity to write for the comedy show “Taskmaster” but he had to turn it down mainly because it clashed with his TalkSPORT show. This was seen as a clear financial risk.
Business on Hawksbee's own account
Hawksbee used his own laptop, mobile phone when undertaking research and preparation at home but used TalkSPORT equipment during the live broadcasts. KPL had no responsibility for investment in the show but this was not seen as relevant and this test was considered broadly neutral.
Hawksbee's TalkSPORT integration
With Hawksbee being part of TalkSPORT’s longest-running show, it is understandable that HMRC would make the case for him being part and parcel of the broadcaster’s organisation. However, he had no line manager and had no management responsibilities himself, didn’t attend TalkSPORT staff events, had no TalkSPORT business card and his security pass only allowed him access to the production studio floor. This was enough to trump the Revenue’s argument.
Hawksbee's economic dependency
The TalkSPORT income, on average, formed approximately 90% of KPL’s turnover. Coupled with the length and time over which the contracts were renewed, KPL’s economic dependency on TalkSPORT were seen as material indicators of an employment relationship.
In summary, the relationship was characterised by:
- No obligation on TalkSPORT to provide work;
- Controlled services chiefly restricted to delivering the show;
- No entitlement to employee-type benefits or other rights;
- Fee per show delivered, with no retainer or bonus; and
- Hawksbee not seen as part and parcel of TalkSPORT.
The Tribunal caveated their ruling by stating that others might reach a different conclusion, as demonstrated by having to reach a decision by the casting vote of the judge. This might offer some encouragement to HMRC to appeal this decision given their miserable run of IR35 defeats and that they have a number of other enquiries involving those working in the world of media that will rely on tribunal decisions swinging in the department’s favour.
Reference was made to the 'Good Work Plan' published in December 2018, in which the Government announced its intention to “legislate to improve the clarity of the employment status tests reflecting the reality of modern working relationships”. In the Tribunal’s view increased clarity is needed right now as most of the case law that was referred to during the appeal hearing were decided some time ago when working practices may have been very different. Never a truer word spoken.
The full transcript of the decision can be found here.
Additional notes for contactors
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