A knockout blow for HMRC on IR35
With everyone in the private sector bracing themselves for off-payroll (IR35) tax legislation in April 2020, it seems that the HMRC is facing some very public defeats from disgruntled contractors.
ITV presenter, Lorraine Kelly who was deemed to be an employee by the HMRC and fined £1.2 million back in 2016(1) - has just won her case in a tax tribunal.
Kelly claimed she was not an employee and was a freelance contractor acting through her company Albatel Limited as a presenter on Daybreak and Lorraine. Judge, Jennifer Dean ruled in her favour as Kelly was not receiving any form of benefits, neither was she appearing as herself, but rather a persona to entertain - someone who is contracted to perform a role. Kelly also claimed that she was working for a number of other media companies which proved her own control over her services.
“The level of control falls far substantially below the sufficient degree required to demonstrate a contract of service and we are satisfied that the factors strongly indicate that the contract was one for services.” (2)
The case highlights the difficulty the HMRC has had when contractors raise challenges to their IR35 status, also the ineffectiveness of the current CEST (Check Employment Status for Tax) tool in determining accurate status.
The Association of Independent Professionals and the Self Employed's deputy director of policy Andy Chamberlain also stated:
“Lorraine Kelly’s case is the fourth of five IR35 cases that HMRC have lost since 2018. It is now clear that they have wrongly been hounding many BBC and ITV presenters over a tax law they do not understand themselves.” (3)
In the latest IR35 consultation paper, released last month, the government has stated that there should be more clarification between clients and contractors about their status and how it has been determined.
The off-payroll worker and the fee-payer will have the right to seek reasons for a status determination. However, it is still vague about how this will be enforced. Clients will still need to determine how to resolve disputes about IR35 decisions themselves.
Dave Chaplain of Contractor Calculator stated today that “as HMRC continues to be exposed for its wrongful pursuit of tax under IR35, how Government considers now to be a suitable time to implement the contentious Off-Payroll rules within the private sector is beyond me. Ms Kelly was able to successfully appeal a significant and unsubstantiated tax bill. Unfortunately, many contractors who may be subject to a similar fate due to the Off-Payroll rules won’t have the finances or resources to do the same.” (4)
Lorraine’s case simply highlights that there are a number of glaring issues still to be addressed before IR35 is applied to the private sector. Most importantly, HMRC’s assessment tool and the dispute management process.
Whatever final form the legislation takes, we believe that contractors are vital to the growth of business in the UK. Therefore, Kingsley is committed to providing quality, flexible candidates who meet our clients’ immediate needs with our full support with IR35.
If you are planning to grow or want to discuss flexible workforce options, please contact Caroline Kingsley on 0151 242 1630.
(1) Judge Jennifer Dean, quoted in, Daniel Cave, “ITV Star Lorraine Kelly beats HMRC in £1.2m IR35 case,” Recruitment Grapevine, 21 March 2019, <https://www.recruitmentgrapevine.com/content/article/2019-03-21-itv-star-lorraine-kelly-beats-hmrc-in-1-2m-ir35-case> [Accessed online 21 March 2019]
(3) Hilary Osborne, “Lorraine Kelly is a theatrical artist, tax tribunal judge rules,” The Guardian”, 21 March 2019 <https://www.theguardian.com/business/2019/mar/20/lorraine-kelly-theatrical-artist-tax-tribunal-judge-rules> [Accessed online: 21 March 2019].
(4) As above.