HMRC wins IR35 case against freelance BBC presenters

The tribunal found that PSCs operated by the journalists before 2017 were caught by the intermediaries legislation, known as IR35. At the time, IR35 provided that employment taxes had to be paid by PSCs which provided the services of an individual to the public or the private sector if that individual would have been regarded as an employee of the engaging business if the individual had not used a PSC.

However, the tribunal said that neither the journalists nor their advisers had acted carelessly, so assessment time limits meant that not all the tax could be recovered.

Tax expert Penny Simmons of Pinsent Masons, the law firm behind Out-Law, said that HMRC would be "relieved that an IR35 case has now gone its way" following recent defeats before the tribunal in respect of the employment status of BBC Scotland radio presenter Kaye Adams and ITV presenter Lorraine Kelly.

"This decision (177-page / 1.9MB PDF) should be a warning to contractors and businesses alike to get their houses in order – particularly given the extension of the IR35 compliance rules to private sector engagers from April 2020," she said.

For public sector engagers, such as the BBC, the responsibility for determining the employment status of contractors using PSCs and applying PAYE where necessary, passed from the PSC to the public sector engager in April 2017. From April 2020, private sector businesses will become liable to determine the tax status of their contractors who work through PSCs and to apply PAYE and pay employer's national insurance contributions (NICs), where required.

Journalists Joanna Gosling, David Eades and Tim Willcox provided presenting services either to the BBC News channel or to BBC World through their PSCs: Paya Ltd, Tim Willcox Ltd and Allday Media Ltd. A PSC is a company, typically a limited company, through which an individual is contracted to supply services, but of which the individual is usually also the owner and sole director.

The tribunal judges found that there was "sufficient mutuality and at least a sufficient framework of control" in the relationships between the BBC and the presenters that they should be treated as employment relationships, rather than cases of self-employment.

Despite the wording of the contracts, the presenters were obliged to make themselves available for work on a minimum number of days, while the BBC was obliged to provide them with a minimum number of days' work or at least pay them for this work. The BBC had the right to "direct, on any day, when and where the presenting and reporting was to be done" and there were "extensive" restrictions on the presenters' ability to carry out activities outside of the BBC, particularly presenting work for other broadcasters.

HMRC will not, however, be permitted to recover all the income tax and NICs that would have been due had the contracts been of employment, as some of its notices issued to the taxpayers were outside of the usual four-year assessment time limit. A longer, six year limitation period applies where an underpayment is brought about "carelessly" by the taxpayer, or by a person acting on behalf of the taxpayer.

The tribunal found that HMRC had to be able to prove that the presenters or their advisers had acted carelessly in order for the longer time limit to apply. It found that HMRC was unable to provide sufficient evidence to justify such an inference.

Employment tax expert Chris Thomas of Pinsent Masons said: "It is reassuring for the taxpayers that the tribunal accepted that they were not 'careless', presumably due to the complexity and subjectivity of the tests that needed to be taken into account. However, it cannot be assumed that the same view would be taken of a corporate end user - and we anticipate that HMRC will be seeking to argue carelessness and potentially assessing penalties once the new regime is in force".