Employment status - IR35 win for HMRC
With the off-payroll (IR35) rules changing from April 2021 for medium and large sized businesses, there is continued interest in the outcome of the numerous IR35 cases making their way through the courts.
Eamonn Holmes is another television presenter who has found himself at the centre of an IR35 employment status case with HMRC. Although the case was heard in June 2018, the case report has only recently been published.
The facts of the case
Mr Holmes provided his services to ITV through his personal company Red, White and Green Limited under a series of contracts to present This Morning. The First Tier Tribunal reviewed a number of factors relating to these contracts and found that:
- Mr Holmes was not permitted to provide a replacement in the event he was unable to work and he would not be paid if he was unable to work.
- He did not receive any holiday entitlement and was not paid for sick leave.
- Mr Holmes stated that he was able to control the direction of the This Morning episodes. He had complete control over the way in which he chose to present during the show and did not use an autocue.
- Mr Holmes provided his own earpiece.
- He was not required to attend production meetings and rehearsals.
- Each contract required Mr Holmes to present a minimum number of shows and he was entitled to receive payment for a show if it was cancelled (although in practice this never happened).
- Mr Holmes was also able to undertake other work, notably presenting Sunrise for Sky, whilst being engaged by ITV to present This Morning.
- Any extra activities required by This Morning would be negotiated with his agent.
The Tribunal’s conclusion
The First Tier Tribunal found that the relationship between Mr Holmes and ITV was one of an employee and employer and dismissed Mr Holmes’ argument that he was self-employed.
The decision in Mr Holmes’ case has surprised many. On the face of it, it is difficult to understand why HMRC Mr Holmes lost his case when Lorraine Kelly won hers, despite many of the factors being the same.
Lorraine Kelly successfully argued that she was self-employed and relied on the fact that ITV had very little control on how she presented her show. However, the Tribunal in Mr Holmes case found that, whilst he was able to present in his own style, most of the show’s content was decided upon in advance, without Mr Holmes’ input. ITV therefore retained editorial responsibility for the content of the show.
Mutuality of obligation was also cited as being one of the key factors in the Tribunal’s decision; whether there is an obligation for the employer to offer work and for the worker to accept it. The fact that ITV would be liable to pay Mr Holmes for any cancelled shows pointed towards him being an employee. Whilst Mr Holmes stated that he would not pursue that right as it would damage his working relationship with ITV, the existence of that right remained and the Tribunal argued it was proof of ITV’s obligation to provide Mr Holmes with work/payment.
CEST and mutuality of obligation
Mutuality of obligation (MOO) continues to be a contentious issue and one that many feel HMRC has not fully grasped, as discussed in our previous article.
HMRC has provided an online tool (CEST) to help determine whether a worker should be classed as a deemed employee. The new version of CEST (published January 2020) contains new questions that hint at addressing MOO but unfortunately the questions still do not expressly address whether or not there is an expectation that work will be offered, nor that there is an expectation that offered work will be accepted. Instead, the questions in the ‘Business on own account’ section are mostly concerned with whether the worker is able to work for other organisations, owns the intellectual property rights arising from the work and whether the worker has been self-employed before.
The publication of this case provides a timely reminder of the importance of ensuring that employment status has been fully reviewed. Determining employment status will become increasingly important when the off-payroll working legislation takes effect from April 2021 as it will be the responsibility of the end client, and not the intermediary, for reviewing the status of each worker.
For help and advice please get in touch with your usual BDO contact or one of our Employment Tax specialists.
Read more about applying IR35 in the private sector.