IR35 has been the bane of many self employed workers and their advisers since its controversial inception many years ago.
Recently, several high profile TV presenters have been under the spotlight in respect of whether IR35 applies to their working arrangements. The latest of these resulted in a loss for HMRC.
In today’s Shipleys Tax note we briefly look at the recent IR35 case making headlines and what it means for taxpayers.
The first half…
HMRC’s assertions that IR35 applies to certain working arrangements has been something of a mixed bag, especially for the TV industry. Alongside its successes, HMRC has suffered several high-profile defeats, including against the television presenters Kaye Adams, Helen Fospero, and Lorraine Kelly; whilst Gary Lineker’s case still seems to be languishing in extra time. The latest case to be heard was that of Adrian Chiles, most recognisable as a TV football presenter and Radio 5 host.
What is IR35?
The much maligned rule is another name for the “off-payroll working” legislation. The term ‘IR35’ actually refers to the press release that originally announced the legislation in 1999.
Simply put, the IR35 rules are designed to work out whether someone is genuinely self-employed or employed rather than a “disguised employee” and should be treated as such for the purposes of paying tax. There are multiple factors that the courts use to help determine this, e.g. control, substitution and supervision being among them.
This is because that those who set up and work through a limited company are perceived to be more tax efficient as opposed to those who are employed. HMRC attempt to argue that some taxpayers try to take advantage of this tax efficiency by appearing to be self-employed on the surface, when actually they would be an employee were they not providing their services through a limited company. Despite the fact this is patently not always the case, the off-payroll working rules are designed to tackle this, but the rules have been forever attacked for being overly complicated, causing unjust outcomes and, at times, being unworkable.
The second half comeback…
In Adrian Chiles’ (“A”) case the Tribunal disagreed with HMRC’s assertions that A was an employee (in all but name) of both the BBC and ITV. The Tribunal held that A was in business on his own account via his limited company, based on the number of clients he worked for. He had also embarked on a number of unsuccessful commercial ventures, indicating that he bore considerable financial risk. The Tribunal also downplayed the importance of a lack of substitution clause, i.e. that A did not have the right to provide a substitute if he were unable to undertake his duties.
The Tribunal took a “big picture” approach and decided that on the face of things the arrangements with both the BBC and ITV were part of A’s business, and not part of an arrangement to which IR35 would apply.
Tribunal decisions are not binding, and thus it is likely that HMRC will appeal. However, it does show that these high-profile cases should not be taken at face value and the complexity of the off-payroll legislation makes it paramount that specialist advice is sought to avoid the pitfalls in this area.
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