Does HMRC understand its own IR35 rules? TV stars take taxman to court and win

  • Posted by: AD Group
  • 17 June 2019

Former Loose Women presenter Kaye Adams has successfully challenged HMRC in court, confirming a job she worked on with the BBC qualified as being ‘off payroll’ for tax purposes.

This then begs the question: is HMRC clear on its own IR35 rules and how to apply them?

What is IR35? A guide for the self-employed
IR35 reform: 7 things contractors should know about the government’s latest announcement
7 of the best reactions to the government’s IR35 tax raid in the Budget
Is business insurance a legal requirement?
No longer allowed to determine your own self-employed status
Since 2017, contractors and freelancers can no longer determine for themselves whether they’re self-employed on jobs they work on in the public sector. From 2020, this rule is set to apply to the private sector too.

It has encouraged organisations like the BBC, who hire contractors, to apply blanket decisions on whether certain contracts fall within IR35.

Self-employed status under scrutiny
Adams’s case went to a First Tier Tribunal to decide whether she really was self-employed when she worked on The Kaye Adams Programme on BBC Radio Scotland. Her case concerned tax years 2015/16 and 2016/17.

The tribunal was satisfied that she was self-employed due to the fact that she had plenty of other work outside of the BBC job.

HMRC’s response to Adams’s case
Speaking to The Register, HMRC commented: “We are disappointed that the First Tier Tribunal has decided that the intermediary rules (also known as IR35) did not apply in this case.

“We will carefully consider the outcome of the tribunal before deciding whether to appeal.”

Andy Chamberlain, Deputy Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), had this to say about the latest case: “Kaye Adams’s victory is yet another example of HMRC’s complete failure to understand its own labyrinthine self-employed tax laws.

“This is the fifth of six IR35 cases HMRC has lost since it made its disastrous changes to IR35 in the public sector in 2017.

“This should be a loud warning bell to the government not to extend the hugely damaging changes to IR35 to the private sector next April. When HMRC clearly cannot understand these tax laws, how can they possibly expect businesses across the UK to?”

Not the first time a celebrity has been targeted over IR35
Back in March, another report in The Register revealed that TV breakfast host Lorraine Kelly successfully challenged a tax bill of £1.2 million from HMRC.

The taxman said she was under a direct contract with ITV, but the tribunal judge declared the arrangement to be a “contract for services”.

In deciding Kelly’s case Judge Jennifer Dean took into consideration the fact that the TV star didn’t get typical employee benefits like holiday, pension entitlement, sick pay or maternity leave from ITV.

She also noted the lack of job security and the fact that Kelly worked for other media companies.

CEST not fit for purpose
Judge Dean took the opportunity to highlight the issues being raised with HMRC’s Check Employment Status for Tax (CEST) tool, which is designed to determine whether your work falls inside or outside of IR35.

She said: “In our view 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.”

Dave Caplin, CEO at ContractorCalculator, said: “Time and time again we have debunked HMRC’s claim that CEST is accurate and once again we have proved this to be the case.”

Incorrectly taxing people nothing to celebrate
Caplin further commented that: “HMRC has also previously boasted that the off-payroll reforms have netted £550m, which is nearly double the amount previously forecast by the Office of Budget Responsibility.

“Damaging and disrupting businesses by incorrectly taxing them, and extracting money which is not due, is nothing to be proud of and certainly not a sign of compliance.”

While Andy Chamberlain, deputy director of policy at IPSE said: “This judgement should be a wake-up call to government that it cannot expect businesses to understand a tax law that it cannot even implement itself.”