HMRC secures another IR35 victory at Upper Tribunal (UT) and overturns the decision of first tier tribunal made in favour of Kickabout productions back in June 2019. After taking all the factors into consideration, Judge Mr Justice Zacaroli announced the judgement against the Radio presenter and comedy writer “Paul Hawksbee” and in favour of HMRC at the upper tribunal.
This case was filed by Paul Hawksbee’s personal service company “Kickabout productions” against the notice issued by HMRC to pay Tax and Class 1 National Insurance contribution amounting to £143,000 for the period of 2012 to 2015. Radio presenter Paul Hawksbee was challenged by HMRC for not being compliant with IR35 rules in relation to the contracts performed via their personal service company. He began presenting a live show as a co-presenter along with Andy Jacobs for Talksport radio on weekdays. He had signed two agreements with Talksport within the period of 3 years starting from 2012-13 to 2014-15, that constituted around 90% of income of the kickabout productions. First Tier Tribunal (FTT) took two issues into consideration –
- If the services are directly provided, what would be the terms and conditions of the hypothetical contract signed between presenter Hawksbee and Talksport.
- Is this a contract of employment or contract of services?
Radio Presenter Paul Hawksbee succeeded in winning this IR35 appeal against HMRC and the following announcements were made –
- FTT found that there was an existence of mutuality of obligation between Mr. Hawksbee and Talksport but radio station was not obligated to provide minimum amount of work. As a result, degree of mutuality and other circumstances together failed to establish the employment status.
- The format and the content of the show were decided by Hawksbee.
- When the show was on air, limited control was in the hands of Talksport that not indicates employment relationship.
- The services were to be performed by Hawksbee personally as there was no right of substitution.
- Hawksbee was not invited or did not attend the staff meetings or events of Talksport.
- Hawkbee was not entitled for appraisals or any rights of holidays, sick pay, paternity leave, pensions etc. Hence, it was considered as a genuine contract of services not a contract of employment.
HMRC’s overturning of FTT decision and winning against Radio presenter Paul Hawksbee at Upper Tribunal (UT)
Following the FTT decision, declared in June 2019, many factors that were presented previously were interpreted in a different way at UT that overturned the decision and made it in favour of HMRC. There are certain factors that completely go against Kickabout productions at upper tax tribunal as announced by Judge Zacaroli –
- Previous decision made at first tier tribunal was taken through casting votes and there was no weightage given to the key employment status tests.
- There was no importance given to Mutuality of obligation (MOO) at the FTT.
- It was not expressly stated by FTT that Talksport is not obligated to provide work to Hawksbee as per the two hypothetical contracts.
- The overall decision taken by FTT was an error of law.
- Although UT somehow agreed with the conclusion of FTT that there was relatively limited control of Talksport over the tasks performed by Hawksbee, it was considered that because Talksport had the ultimate right of deciding the format or content of episodes, sufficient framework of control was present in order to satisfy the stage two of the Ready Mixed Concrete analysis.
- Judge Zacaroli also pointed out certain contractual factors on which the arguments about self-employment were made in FTT –
- It includes the fixed fees received by Hawksbee for each show indicates “Financial risk”.
- The conclusion that “Hawkbee is not part and parcel of Talksport” does not make things clear and adds very little in this case.
What CEO of Contractor Calculator “Dave Chaplin” says?
It is really surprising and unexpected ruling. Before arriving at any firm decision or conclusion, analysis should be done carefully in order to know – What type of impact it will create on IR35 and off-payroll for more traditional based contractors in Engineering & IT industry.
This is a huge victory for HMRC, especially after losing at the FTT. Though many of the presenter cases are still settling down through the courts, the facts of each case might contradict each other, resulting in different results and therefore a conclusive analysis cannot be reached. Every case in the court has been assessed on its own merits but it seems that the reality of the situation is not properly reflected due to badly drafting of the contracts.
Therefore, it is vital agencies and clients take time to review their contracts before the off-payroll kicks in April-2021, to ensure they mirror the working practices.