IR35 Reform Delays: Answering frequently asked questions
With only a year to go until IR35 changes are enforced in the private sector, it emerged last week that HMRC lost a £1.2m IR35 tax tribunal involving the TV presenter and household name, Lorraine Kelly.
HMRC put forward its argument that the contract Ms Kelly’s company (Albatel Ltd) had with ITV Breakfast Ltd between 2012 and 2017 reflected one that belonged inside IR35, meaning that she owed The Treasury an astonishing £1.2m in tax.
Ms Kelly appealed this in February 2017, before the judges came to a verdict that the services provided by Albatel Ltd resembled a self-employed arrangement and not, as HMRC argued, an employee and employer engagement.
The level of control Ms Kelly had in the contract was the deciding factor. The presenter carried out her work with autonomy and ITV Breakfast Ltd did not have direct control over the way she provided her services. This was emphasised in the case details, which stated: “We accepted Ms Kelly’s evidence that she decided on the running order of the programme, the items to feature and the angle to take in interviews.”
A number of examples that demonstrated Ms Kelly’s level of control were put forward, with the presenter telling the judges she turned down a 4am interview with Sir Elton John for “her convenience.” Similarly, Ms Kelly declined an offer to be involved in the Woman of the Year awards because it clashed with a project she was working on with the BBC at the same time.
Due to these various factors, the judges decided that ITV wasn’t employing a “servant”, but “rather purchasing a product, namely the brand and individual personality of Lorraine Kelly.”
That Ms Kelly worked on a number of other assignments while engaged in the ITV Breakfast Ltd contract was another sign that she was self-employed and not using her limited company as a vehicle to avoid tax.
For instance, the presenter went on an expedition to Antarctica for four weeks while working for a magazine, which meant she couldn’t work on her ITV contract. In the judge’s eyes, this, along with the fact Ms Kelly also took on writing, designing and advertising work, meant that she could not be considered ‘part and parcel’ of ITV Breakfast Ltd – important for any contractor operating outside IR35 compliantly.
The case details reveal the judges did agree with HMRC that Mutuality of Obligation (MoO) was present (meaning Ms Kelly was obliged to provide a service), but amounted only to the “irreducible minimum,” so it was not a deciding factor in the outcome of the tribunal.
Ms Kelly, the presenter of shows “Lorraine” and “Daybreak” did not have the right to provide a substitute either. But once again, the level of control she had over the services she provided meant that substitution, like MoO, was not determinative.
In what the judges described wasn’t a “borderline” case, Ms Kelly told the court about her frustration in the way HMRC carried out the enquiry. She explained the “significant delay on HMRC’s part” made for a very stressful experience, while the £1.2m tax liability being discussed caused her “significant anxiety.”
You might be aware that Ms Kelly isn’t the only presenter who has been subject to an IR35 investigation in recent years. After finding BBC Look North presenter, Christa Ackroyd, inside IR35 last year, the taxman has been looking closely at a number of other presenters engaged by the broadcaster.
For the thousands of contractors working outside IR35, Ms Kelly’s win shows just how important it is that they are confident in their status and operating compliantly. While HMRC is said to choose contractors to investigate at random, given the significant amount of money that can be involved in a case, it’s better to be safe than sorry.
At SJD Accountancy we understand that its important to have peace of mind when it comes to the IR35 status of your contracts, which is why we offer IR35 reviews to our clients. Discover more and see how you can benefit on our IR35 reviews page.
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