Out-Law / Your Daily Need-To-Know
TV presenter Eamonn Holmes was subject to off payroll tax rules IR35 and was employed by ITV for tax purposes, the UK's First Tier Tribunal has held
Holmes, a presenter on ITV's This Morning, was engaged by ITV through his personal service company (PSC) Red, White & Green Ltd and had asserted that he was an independent contractor and should not be subject to employment taxes under the off-payroll working rules known as IR35.
UK tax authority HM Revenue & Customs (HMRC) sought to tax Holmes as an employee on the basis that his engagement between 2011 and 2015 fell within the IR35 anti-avoidance rules and therefore his earnings from presenting This Morning during that time should be subject to income tax and National Insurance Contributions (NICs).
"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." concluded Judge Harriet Morgan in her judgment.
"On that basis and having regard to all other relevant factors, my view is that overall, throughout all relevant tax years, the assumed relationship between ITV and Mr Holmes was one of an employment rather than self-employment." Judge Morgan ruled.
"This case is significant for HMRC as it banks another win against the taxpayer in its IR35 crusade." said Penny Simmons, tax expert at Pinsent Masons the law firm behind Outlaw.com. "Mr Holmes had asserted that he had 'total control' over his role as a presenter on This Morning; however, ITV's editorial controls were enough to tip the balance for IR35 purposes."
"The decision comes at a crucial time, as businesses and freelance contractors prepare for changes to IR35 being introduced from April. The emphasis in the judgment on there being sufficient mutuality of obligation and control to indicate that there was an employment relationship for tax purposes should act as an important reminder of the significance of these factors when making decisions about employment status under IR35," Simmons said.
"HMRC and the courts will look at a number of factors when making decisions about employment status for tax purposes and it is not enough to simply label a relationship as being one of self-employment if the reality proves otherwise," she said.
The IR35 rules require that employment taxes be paid by people who provide services through a PSC if that person would otherwise have been regarded as an employee for tax purposes of the engaging business. Currently, where a private sector business engages a contractor through a PSC, liability to decide whether IR35 applies and to pay any employment taxes rests with the PSC.
The rules are due to change from 6 April 2020. From this date, engaging businesses will be made liable for determining whether the IR35 rules apply. They will also be required to operate PAYE and pay employers' NICs. The changes will not apply to small businesses which engage contractors through PSCs.
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