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Tax status of freelancers – who’s in control?

16 May 2019

As we count down to the introduction of the off-payroll workers rules for employers in the private sector from April 2020, HMRC is continuing its campaign against ‘false self-employment’ by targeting high profile freelancers in the entertainment industry.

It has been common for broadcasters and production companies to engage individual actors and performers to provide services outside of PAYE, either via an agency, a limited or personal service company (PSC) or on a self-employed basis. Starting with the public sector (including the BBC), the reformed off-payroll workers rules have, since April 2018, required public organisations to self-assess if IR35 applies to their contracts with any PSCs.

Where IR35 applies, the organisation paying the PSC (the fee payer) must apply PAYE and NIC deductions to the payment for the worker’s services, i.e. treat the worker as a deemed employee for tax purposes. In addition, the fee payer must also account for employer’s NIC and potentially the Apprenticeship Levy. 

However, HMRC has not given up on cases that pre-date the change in rules: it recently issued a number of PAYE Regulation 80 determinations demanding PAYE and NIC (going back four years) from the personal service companies of TV presenters.

Of course it has already had some successes: in a recent judgement confirmed against TV actor Robert Glenister, HMRC succeeded in proving that his PSC had not correctly paid NIC for past years under the IR35 rules. Similarly, in 2018 it successfully argued that Christa Ackroyd (a TV presenter) should have been treated as an employee and not a self-employed contractor working through her PSC.

Yet two more recent cases have highlighted the important factor that ‘control’ plays in applying the rules. HMRC lost its case against TV presenter Lorraine Kelly because the Tax Tribunal decided that her contract with ITV was more a ‘contact for services’ than a ‘contract of service’ because she had control over the content of her show. Similarly, Kaye Adams successfully appealed against HMRC as the Tribunal decided that although the BBC engaged her through her PSC, it did not control her many other engagements.

Once HMRC has dealt with these high-profile cases, it seems likely that it will broaden its campaign to freelancers in other sectors. Anyone trading through a PSC or engaging them should ensure that they fully understand the tax and NIC position for their current and past contracts. 

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