With just six months until IR35 reform is extended to the private sector, it emerged last week that television presenter, Helen Fospero, won her IR35 case appeal, resulting in a second IR35 Tribunal loss for HMRC in less than seven days.
Ms Fospero’s victory, which follows IT contractor, Richard Alcock’s £240,000 Tribunal win only a few days earlier, means the presenter will not need to pay the £80,770 in National Insurance Contributions and income tax that HMRC was demanding as a result of working outside of the legislation.
The contracts examined took place in the 2012/13 and 2013/14 tax years between Ms Fospero’s limited company, Canal Street Productions Limited and ITV, where she often presented on the programmes Daybreak and Lorraine.
Similar to Mr Alcock’s very recent IR35 victory, Ms Fospero was declared a genuine contractor largely on the grounds that Mutuality of Obligation (MoO) didn’t exist in her engagements with ITV.
Dismissing HMRC’s version of events, Judge Ashley Greenbank explained: “In the period in question, Ms Fospero was engaged, through Canal Street, in a separate business, she worked under a series of short-term engagements for ITV, she had no guarantee of further work outside those engagements and ITV had no obligation to provide any work.”
Mr Greenbank also spoke of there being no “mutuality of work-related obligation” given “Ms Fospero would have no guarantee of work and would be under no obligation to perform work if it was offered.”
Much like HMRC’s previous IR35 Tribunal defeat, which also hinged on MoO, Ms Fospero’s win exposes the flaws of CEST – the taxman’s IR35 tool – which doesn’t take this key IR35 status test into account, presuming that it’s always present. Qdos CEO, Seb Maley, said: “Because Mutuality of Obligation ultimately didn’t exist”, “HMRC’s IR35 tool isn’t reliable, given it assumes MoO is present in every contractor engagement.”
While Ms Fospero appeared regularly on ITV, that she carried out work with other clients was taken into consideration by the Judge, who stated: “It seems to me that the agreements with ITV were just part of that wider business carried on by Ms Fospero through Canal Street, in which Ms Fospero undertook various types of presenting work.”
Given the news of Ms Fospero’s win broke with only six months to go to private sector reform, IR35 expert, Seb Maley, also outlined the importance of compliance as 6th April 2020 approaches – even though when changes do arrive, contractors will not be responsible for deciding their own tax status unless they work with a ‘small’ private sector company.
Mr Maley said: “Given the tax office’s aggressive nature towards independent workers, contractors need to be confident of their IR35 compliance.”
He then urged private sector firms to get to grips with the legislation: “The fact that the tax office is willing to go the distance in cases that are genuinely outside IR35 should encourage clients and agencies – that will soon become liable for IR35 – to ensure their own compliance well before April 2020.”
Meanwhile, IPSE’s Deputy Director of Policy, Andy Chamberlain expanded on this, making the point that Ms Fospero’s case “raises concerns about its (HMRC’s) credibility and authority to oversee compliance in the private sector. How will businesses be able to trust HMRC’s judgement when it continually loses IR35 Tribunals?”
The tax office is reportedly considering appealing Ms Fospero’s and Mr Alcock’s victories.