HMRC wins high profile IR35 appeal

HMRC has won an appeal in an IR35 dispute with a high profile presenter.

Radio presenter, Paul Hawksbee, had a First-Tier Tribunal (FTT) rule in his favour a year ago, after HMRC had argued that the arrangement between his limited company, Kickabout Productions Limited (KPL) and radio station, Talksport, was one of disguised employment and therefore fell into the IR35 provisions.

The original ruling was in favour of the presenter, who had argued that he was in business in his own right and not an employee of the station. HMRC argued that 90 per cent of his income in the past four years came from the Hawksbee and Jacobs Show and made the case that this effectively made him Talksport's 'employee' and liable for Income Tax and National Insurance Contributions as an employee.

At the time, Judge Scott rejected HMRC's claims citing a number of factors which he decided pointed away from the 'disguised employee' role.

HMRC appealed the decision to the Upper Tribunal (UT) who reconsidered the so-called hypothetical contracts between Mr Hawksbee and TalkSport and placed a different interpretation on the situation. The UT concluded 'taking all of the relevant factors into account, we consider that viewed as a whole they are not inconsistent with the hypothetical contracts being contracts of employment.'

Mr Hawksbee now faces a tax bill reported to be in the region of £140,000.

Needless complexity

Tax specialists Qdos called it a 'rare win' for HMRC, but did not think that it was a 'clear cut' finding.

Seb Maley, Qdos CEO, said: "This is a rare win for HMRC, but one that shines a light on the needless complexity of the IR35 legislation, which can easily be misinterpreted and misapplied. It also shows the significant sums that are very often at stake in these tax cases, with Mr Hawksbee now expected to repay a reported £140,000 to HMRC. It's why, for this very reason, contractors choose to protect themselves with IR35 insurance. It's also why many private sector companies, that will carry the risk next year, are encouraged to do the same.

"The fact that this case was by no means clear cut also goes to show how important it is that IR35 status is set with care and after careful consideration of the written contract and a review of the working practices. Contractors, along with hiring organisations and recruitment agencies, need to be acutely aware of this when deciding if the service provided reflects self-employment or employment.

"As concerning as this result is, it's worth pointing out that Mr Hawksbee's engagement - like many other presenters who have faced an IR35 investigation - is quite different from a typical contractor's. In our experience, the vast majority of contractors are genuine and belong outside IR35."

Full UT judgment of the decision is here.