Freelance broadcasters targeted by HMRC’s IR35 clampdown face an uncertain future after a high profile IR35 tribunal victory for the taxman that appears inconsistent with other recent judgments.
Television and radio presenter Eamonn Holmes lost his appeal against determinations and tax bills imposed by HMRC concerning four engagements between his limited company, Red, White & Green Limited (RWG), and ITV. The contracts in question were for the provision of services presenting daytime television programme This Morning and spanned the tax years 2011/12 to 2014/15.
- Control decision hinged largely on contentious argument about editorial control
- Unenforced contractual condition proved killer blow from MOO standpoint
- Presenter’s substantial work outside of This Morning granted little consideration
“The case itself is rather nuanced, similar to the other presenter cases, and it’s hard to understand how Mr Holmes has been treated differently to Lorraine Kelly, who also worked at ITV yet who won her appeal,” comments ContractorCalculator CEO Dave Chaplin.
“There are possibly some issues that could be raised at appeal on some key points of law, and it would not surprise me if this was appealed, subject to understanding the results from the other presenter cases that are heading to appeal.”
HMRC came to make a statement to broadcasters
It appears HMRC intended to make an example of Holmes, who Chaplin observes was outgunned in court by the taxman’s usual “army of lawyers”. However, he also notes that a high profile case such as this also risks skewing the public perception of those targeted by the taxman:
“Not all freelance broadcasters pursued by HMRC will be earning similar fees, and many won’t be able to afford to mount a legal challenge to what they may see as an incorrect tax bill. HMRC has clearly attempted to knock down the kingpins in order to frighten the rest to fall in line. People’s livelihoods are at stake here, all because Government isn’t brave enough to align the tax system with the modern way of working.”
Similarities with Lorraine Kelly case – differing outcomes
As has been the case in many recent tribunals featuring presenters, the employment status test of personal service was granted little weight. Both Holmes and ITV executives acknowledged that the broadcaster specifically wanted his services, while contracts stipulated that Holmes’ participation in the programme was “integral to the programme and a material term of the agreement.
“Just as ITV sought to secure the Lorraine Kelly brand due to her popularity and status, the same could be said for Eamonn Holmes,” highlights Chaplin. “If ITV didn’t have these particular presenters in front of their cameras, a degree of value was lost, hence why personal service was considered a lesser factor.”
Against accusations of being heavily controlled, Holmes reaffirmed his stance as a freelance journalist and broadcaster, referring to himself as a “one man band” and “a gun for hire” who “brings something to a programme rather than the other way around”.
Tribunal unmoved by Holmes’ other engagements
The case also drew comparisons with the recent ruling involving presenter Kaye Adams, with RWG’s advisors bringing to the attention of the tribunal Holmes’ multitude of other engagements. This included his work presenting Sky News’ Sunrise, BBC’s Songs of Praise and TalkSport Radio, in addition to writing columns for Best Magazine and the Daily Mirror, and appearances on ITV’s Good Morning Britain and Loose Women, amongst other programmes.
This came in a spreadsheet detailing the proportionate income Holmes had received from This Morning, Sunrise, and other engagements. It showed that This Morning constituted varying proportions of Holmes’ income during the tax years in question, with a high of 72.8% in 2013, and as little as 18.6% in 2015.
However, whereas Adams defeated HMRC largely on the basis that she was deemed in business on her own account, less exploration of the matter present and very little weight appared to be granted to Holmes’ other engagements.
“It’s surprising that the extent of Holmes’ work outside of This Morning wasn’t granted much consideration by the tribunal, especially considering this IR35 factor cropped up recently in the Kaye Adams case,” notes Chaplin.
MOO: Unenforced contractual clause struck ‘killer blow’
The tribunal’s decision hinged on two main factors; control and mutuality of obligation (MOO), with Judge Morgan commenting: “I have concluded that there was sufficient mutuality and at least a sufficient framework of control to place the assumed relationship between ITV and Mr Holmes in the employment field.”
Whereas the conclusions drawn concerning control were somewhat contentious, the factors determining Holmes’ position with regards to MOO appeared to be more straightforward. Ultimately, it was a contractual condition which, although questionable whether it was ever intended by the parties to be exercised, cost the presenter.
The tribunal heard how contracts between ITV and RWG would stipulate fixed dates upon which Holmes was expected to provide services to ITV, and that Holmes was contractually entitled to payment in full for dates cancelled by the broadcaster. These terms appeared at odds to the actual reality, but were relied upon in the decision.
“Unfortunately for Holmes, it didn’t matter that he hadn’t insisted on payment in these instances,” says Chaplin. “The fact that it was written into the contract was the killer blow as far as mutuality of obligation is concerned. Just because a contractual right is not exercised, does not mean the right does not exist.”
Taxman’s OFCOM argument considered by tribunal
HMRC once again referred to the requirement that Holmes abide by guidelines laid down by OFCOM as evidence that he was controlled. The tribunal in the Kelly case dismissed this argument, acknowledging that OFCOM regulations apply irrespective of employment status. However, Judge Morgan appeared to factor this into her conclusion concerning control, in addition to several other contencious factors, including:
- The fact that Holmes was required to comply with health and safety guidelines
- Holmes’ agreement not to endorse any products or services during the show
- The fact that ITV had the contractual right to restrict Holmes’ other activities to some extent
“Adhering to OFCOM is mandatory regardless of employment status,” comments Chaplin. “These regulations are an external outside framework and so would typically not be considered control by the master over the performances of services. It’s like being expected to adhere to the law by not commiting the crime of murder of your colleagues.”
He adds: “If Holmes is to mount a successful appeal to this outcome, the element of control will probably play a major role, alongside further consideration to the fact he was in business on his own account for almost 40 years.”
Tribunal considers differing versions of control
Meanwhile, HMRC referred to the case of White and another v Troutbeck SA [2013] as support for its view that it is the right to overall control which matters rather than day to day control, adding that ITV had sufficient contractual right of control over what Holmes did when performing his services, and also when and where he provided them.
The taxman also argued that ITV had the contractual right to control how Holmes performed his duties, even if in practice it couldn’t necessarily enforce this right until a programme had finished.
Representing Holmes, Mr Robert Maas countered: “Control such as to make ITV master must comprise control over the performance of the duties themselves; setting the contractual framework within which the duties are to be performed is not control over their performance.”
Mass added that the main service that Holmes was engaged to provide didn’t begin until he went on air, arguing it was therefore unrealistic to say that as ITV controlled Holmes simply by virtue of choosing the time and place.
Judgment hinges on contentious interpretation of control
Despite this, the final judgment also contained persistent references to ITV’s ultimate editorial control over the programme, a framework within which Judge Morgan curiously acknowledged:
“Mr Holmes had considerable autonomy in how he prepared for and presented the programme due it seems to ITV’s high regard for his skills and to the nature of the live environment in which he had to present the show.”
For Chaplin, the decision contains different treatement compared with those in recent high-profile cases: “As the company responsible for broadcasting the programme, ITV is always going to retain a significant degree of editorial control.
“This was acknowledged in the Kelly case, the Ackroyd case and especially in the Adams case, where the Judge noted that MOO and editorial control wouldn’t suffice in determining a contract of employment if inconsistent with the other terms.”
He adds: “But the control it yields over the show’s output doesn’t constitute control over Holmes’ performance of the services provided to create the output, which Judge Morgan even acknowledged was lacking. You have to expect that this is an area that could be perceived differently at Upper Tribunal.”
Chaplin concludes: “With both the Kickabout case and the BBC presenters case decided on casting votes, which is quite rare, the case law around presenters and broadcasters needs some clarity from the Upper Tribunal to sort out what at the moment appears to be an inconsistent mess. Hopefully the results from further Upper Tribunals will deliver some desperately required tax certainty.”