HMRC has faced another defeat after presenter Lorraine Kelly successfully appealed against a tax bill of £1.2 million for her work at ITV Breakfast. This is the fourth IR35 case HMRC has lost since beginning of 2018, a clear evidence of the fact that HMRC does not have an understanding of its own tax legislation.
Lorraine signed a contract in 2012 with ITV through her own limited company Albatel Ltd, to present the two shows named “Lorraine” and “Daybreak” (show ended in 2014). Lorraine received a bill of nearly £1.2 million from HMRC in which HMRC asked Lorraine to pay £899,912 as income tax and £3,12,615 as national insurance contribution (NIC’s). HMRC claimed that she was an employee and owes around £1.2 million to HMRC and bought this case under IR35 legislation which aims to crack down on thousands of personal service companies (PSC’s) – like Lorraine’s used by self-employed contractors to manage their earnings. Lorraine in response appealed against the tax authority by saying that she was not an employee of ITV and worked as a freelancer.
On 21st March 2019, tax tribunal declared the judgement in the favour of TV presenter Lorraine Kelly and the following statements were made –
HMRC claimed that Ms Kelly was working under the control of ITV and disregarded her claim of being an ‘entertainer’. According to them it was a contract of services and owed £1.2 million to HMRC. HMRC also said that Ms Kelly has wrongly claimed her agent’s fees as tax deductible because tax deduction is only permitted for theatrical performers like actors, dancers, singers, musicians & theatrical artists.
After losing the case, HMRC spokesperson said that “We are disappointed that the First tier tribunal has decided that the intermediary rules (also known as IR35) did not apply in this case. We will carefully consider the outcome of the tribunal before deciding to appeal further”.
Statement by Ms Kelly’s Lawyer
Ms Kelly’s lawyer argued that the statements said by HMRC that “Lorraine is an employee of ITV” and “she has wrongly claimed her agent fees as tax deductible” are absolutely incorrect as she is an entertainer and should be included in the category of “theatrical performers” and has a full right to claim her agent fees with the tax deduction.
Statement by “CEO, Founder of Contractor Calculator “DAVE CHAPLIN”
Dave Chaplin commented on the ruling and said IR35 was created by HMRC in April 2000 to crack down on the ideological invention by HMRC in relation to deemed employees. He also said that HMRC should stop harassing the genuinely self-employed persons with this ridiculous piece of legislation as this case highlights that HMRC has lack of understanding in relation to employment status.
The Decision by Judge “JENNIFER DEAN “
The judge “Jennifer dean” speaks and declares her judgement in the favour of Lorraine Kelly on the basis of the following points –
- Tribunal said that Ms Kelly cannot be considered as an employee as she didn’t received any staff benefits like holiday or sick pay and was allowed to carry out another work.
- Judge “Jennifer dean” also agreed with Kelly’s lawyer that she should be considered as a theatrical artist which means that any payments made to an agent would be allowed as a tax deductible expense.
- She also added that the contract signed between Kelly and ITV was a contract for services and not that of employee with the employer.
- She also said that we were satisfied that Kelly has its own persona and she presents herself as a brand which ITV wanted when they engaged her for the television show. Judge concluded with the statement that “Ms Kelly is an entertaining lady no doubt about that but the point here is that for the time Ms Kelly signed a contract with ITV and performing live on air – she is “public Lorraine Kelly”.
With off-payroll rules coming in the private sector from April 20, this case poses a great concern as how can contractors and companies are expected to understand a legislation that even the law-maker doesn’t understand and cannot implement properly.