In the latest IR35 case, presenter Eamonn Holmes has lost an appeal at the Upper Tribunal against HMRC leaving him liable to pay an unspecified amount in tax
The case, first heard at the First Tier Tribunal in February 2020, considered whether Holmes was directly employed by ITV between 2011-12 and 2014-15 as a presenter on This Morning, or whether this was self-employment.
The litigation involved the IR35 intermediaries legislation, which is designed to clamp down on contractors who charge for their services through personal service companies.
The Upper Tribunal dismissed the appeal on the basis that Holmes’ his contract with ITV’s This Morning programme, arranged through Holme’s personal services company Red, White and Green Ltd (RWG), meant that Holmes was effectively an ITV employee.
In the Upper Tribunal, Holmes appealed against the FTT’s decision, arguing that it had erred in law in determining that he would have been an employee for ITV according to the contract.
The issues concerned whether Holmes would have been an employee of ITV, under a contract of service, or whether he would have been providing his services as a self-employed person under a contract for his services.
Under section 49 of the Income Tax Act (ITEPA 2003), a person will be liable for income tax purposes when their services are ‘provided under a contract directly between the client and the worker’.
Between 2011-12 and 2014-15, Holmes entered into four contracts with ITV for the provision of his services as a presenter on This Morning.
Each contract was for approximately one year, with short gaps in between. The FTT found that the terms of the assumed contracts were equivalent to the terms of the actual contracts, being that Holmes was the contracting party.
Under the contract, Holmes was to provide his services as a ‘first class’ presenter in full and willing cooperation with requests made by ITV in accordance with the agreement.
Holmes declared significant income from self-employment on his tax returns for the relevant tax years with earnings between £169,371 and £348,286.
Keith Gordon, instructed by Alliotts LLP Chartered Accountants, criticised the FTT’s findings of overall control as wrongly focusing on editorial control, which he argued related to ‘how’ the task was to be performed and not ‘what’ tasks were performed.
More specifically, Gordon argued that the editorial responsibility for the content of the programme was control over ‘how’ the task of presenting was to be done.
Under ‘mutuality of obligation’, one of the factors of IR35 case law, both parties must be obliged under contractual law to act upon their promises.
The FTT ruled that there was ‘sufficient’ mutuality of obligation between Holmes and ITV on the basis that throughout all relevant tax years, the relationship between both parties was one of an employment rather than self-employment.
Gordon argued that Holmes had ‘total control’ over how he acted as a presenter, including doing his own research, developing his own questions, and following a prepared script only ‘10% of the time’.
Holmes described himself to the tribunal as a freelance journalist and broadcaster and as a ‘gun for hire on my terms’.
However, HMRC argued that whether Holmes was ‘part and parcel’ of ITV was no real assistance when assessing whether he was self employed by ITV.
Gordon argued that where an individual had ‘multiple engagements’ with rival organisations, that is precisely the case where it ‘would be useful’ to ask whether the individual is part and parcel of the particular organisation.
He also stressed that the FTT ‘made plain’ that it gave no weight to Holmes’ other activities and whether the contracts were part of his carrying on a business on his own account.
Holmes also worked with Sky News on a programme called Sunrise between 2011 and 2015, which he said occupied more of his time than This Morning, and that he carried out a number of other engagements on a self-employed basis.
However, the tribunal found that for the tax years 2011/12 and 2012/13, RWG’s main income stream was from his work for This Morning.
Justice Mellor said: ‘First, in the event that we had found an error of law in the decision and determined to set it aside, Mr Gordon indicated that the appellant wished to rely on the custom and practice of the broadcasting industry in using freelancers.
‘He sought to adduce further documentary evidence to establish that custom and practice. In the event, we have found no error of law and it is not necessary for us to say anything further in this regard.
‘Second, to those unfamiliar with the legal principles applicable in the context of the intermediaries legislation, it may seem that Mr Holmes’ work for several organisations points to him being in business on his own account, ie, self-employed in all of his work.
‘However, the case law clearly establishes that an individual may be considered to be engaged under several contracts of employment, each contract accounting for a different period of his or her working week and be self-employed for other engagements.’
It dismissed the appeal on the basis that the contract meant that Holmes was an ITV employee and therefore should pay the appropriate amount of national insurance and income tax.
