This month’s Chartered Accountants Tax Case Digest examines another First Tier Tribunal (“FTT”) case where the taxpayer won their appeal against a tax and national insurance assessment by successfully arguing that the intermediaries legislation (IR35) did not apply as the appellant who was providing the services was not an employee due to the lack of control by the engaging party.

This is the third case in as many month’s which HMRC has lost where the appellant was involved in broadcasting activity. To date it is not clear if HMRC plans to appeal these decisions. In the August 2019 issue of tax.point we covered a case where HMRC were successful in the context of IR35 and broadcasting activity.

HMRC has recently published draft Finance Bill 2019 clauses which contain the rules for extending the IR35 off-payroll working public sector rules to the private sector from April 2020. This month’s UK feature article (starting on here) examines this draft legislation.

Background

The FTT examined an appeal by Kickabout Productions Limited (“KPL”) against a notice of determination of PAYE and Class 1 National Insurance Contributions (“NICs”) issued by HMRC. The assessments related to the IR35 legislation.

KPL was a personal service company (“PSC”) established by Mr Hawksbee and it provided his services as a radio broadcaster to TalkSPORT Limited (“Talksport”). HMRC determined that for the periods under appeal the IR35 legislation applied to those services, on the basis that the hypothetical contract between Mr Hawksbee and Talksport would have been a contract of employment. The total amount under appeal was almost £145,000 and covered the tax years 2012/13-2014/15 inclusive.

Mr Hawksbee has been a comedy script writer since the mid-1980s writing scripts and generating ideas for a range of successful televisions shows as well as being known for presenting the radio show (“The Show”) which was the subject of this appeal. The Show has been running for 18 years. Mr Hawksbee had not worked as a radio presenter outside his work on the daily show (“The Show”).

The written evidence before the FTT included the two successive contracts between KPL and Talksport for the services of Mr Hawksbee. It was agreed that for the relevant years Mr Hawksbee personally performed services for Talksport as a client under a contract between KPL and Talksport.

Contracts for the services to be provided to Talksport were for two-year periods at a time. While KPL was successful in renegotiating successive renewals of the contract, there was never any guarantee or certainty of renewal.

For the years which were the subject of the appeal, income from Talksport comprised approximately 90% of income. Prior to this period non-Talksport income was a higher percentage of total income.

On the basis of the evidence provided, Mr Hawksbee had a large amount of freedom to decide on the format and content of each show, and, depending on their availability, guests for each show. Whilst this was subject to some constraints, these were in order to comply with industry guidelines, the requirement to run ads and sponsor promotions and the need for some news content and to run travel bulletins twice an hour.

The FTT heard that while a producer might alert Mr Hawksbee to when an ad break is due, control over what is said and when rests very much with him. If a producer identifies a breaking news story he will alert Mr Hawksbee, but if Mr Hawksbee does not judge the story to be relevant he will not announce it.

Outside The Show, when Talksport hosted drinks receptions for potential clients focused around major sporting events, Mr Hawksbee did attend some such events but he missed many others due to other commitments including work engagements.

Mr Hawksbee’s evidence (not challenged by HMRC) was that apart from such events Talksport did not require him to do anything for the company apart from The Show. He also did not contribute to the Talksport Twitter account.

HMRC sought to argue that the intermediaries legislation applied to both contracts. In each tax year under appeal, KPL agreed to provide the services of Hawksbee to present the programme for a minimum of certain identified days (most Mondays to Fridays) and certain times (1 pm to 4 pm). The provision of services by Hawksbee was consistent, regular and predictable.

There were therefore only two issues before the FTT:-

1. What would be the terms of the hypothetical contract between Mr Hawksbee and Talksport if the services had been provided directly?; and
2. Would that contract be a contract for employment or a contract for services?

Decision

The FTT examined the two contracts and a number of arguments presented by both parties in the areas of mutuality of obligation, exercise of control by Talksport and the general nature of the contract agreed between KPL and Talksport.

However, the FTT found that Talksport did not exercise sufficient control over Mr Hawksbee to make it his employer. He was not controlled in the preparation and research of the show. He decided its content and shape and could arrive at the studios whenever he chose before the show was due to go on air.

The pre-show meeting was minimal and simply confirmed choices made by Mr Hawksbee. He also did not attend any post-show debrief and was not subject to performance appraisals. When the show was on air, any control by Talksport was limited and was not indicative of employer/employee control.

Mr Hawksbee was not therefore ‘part and parcel’ of Talksport. He was not invited to and did not attend staff meetings and had no line manager. He did not attend staff events and did not integrate into Talksport’s wider organisation.

The FTT said that the control in this case could be contrasted with the findings in a previous case concerning the BBC’s control over Christa Ackroyd (Christa Ackroyd Media Limited v HMRC [2018] TC06334 which featured in the August 2019 edition of tax.point.

In that case, the FTT found that, although both parties expected that Ms Ackroyd would be required to present the relevant show, the BBC’s rights under the hypothetical contract to control what Ms Ackroyd could be required to do were much broader.

In this instance, the FTT found in favour of KPL on the grounds there was no obligation on Talksport to provide work and the controlled services were largely restricted to delivering the show. Mr Hawksbee had no equivalent rights to holiday pay, sick pay, pensions or paternity leave and the contracts did not contain any provision regarding medicals or training.

Talksport’s payment obligation was restricted to a fee for each show delivered. There was no retainer or bonus payable under the contract. And while Mr Hawksbee was synonymous with the show, he was not part of the Talksport organisation.

The FTT concluded by saying that looking at the picture as a whole, the relationship was not one of employment but was a contract for services. As such, the IR 35 legislation did not apply and the appeal was allowed.

The full judgment in this case is available from:- http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11192/TC07230.pdf