HMRC records “rare” victory in £140,000 IR35 case appeal
HMRC has overturned an IR35 case verdict carrying over £140,000 in tax liabilities, as it was decided at the Upper Tribunal that veteran broadcaster and Talksport presenter, Paul Hawksbee, belonged inside IR35.
In what one IR35 expert described as a “rare win” for HMRC, the tax office successfully appealed a decision made last year at the First-Tier Tribunal. After taking all of the relevant factors into account, Judge Justice Zacaroli concluded that the service provided by Hawksbee’s company, Kickabout Productions Limited, to Talksport between 2012 and 2015 reflected an inside IR35 engagement.
The result means Hawksbee’s company is liable for a reported £143,126 in tax, which is deemed owed to HMRC.
Judge rejects original MoO assessment
Despite the case not being clear cut by any stretch of the imagination, Judge Zacaroli disagreed with the First-Tier Tribunal verdict that Mutuality of Obligation (MoO) did not exist in the relationship between Kickabout Productions Limited and Talksport, describing their assessment of this as an “error of law”. That the presenter was obliged to provide at least 222 shows per year contributed heavily towards this.
Also disputed by Judge Zacaroli was that Hawksbee took on financial risk when contracting for Talksport. A contractor exposing themselves to financial risk is considered an indicator of an outside IR35 engagement, but it was ultimately decided that this wasn’t present.
The existence of MoO and lack of financial risk supported other pointers towards employment accepted in the First-Tier Tribunal. This included the “exclusivity” Talksport held over Hawksbee’s services and the 18-years the presenter had been working at the radio station.
“Needless complexity” of IR35 exposed
When reacting to the news of this close-run contest, Qdos CEO, Seb Maley, was quick to point out that this IR35 case reflects the “needless complexity of the IR35 legislation, which can easily be misinterpreted and misapplied.”
Maley added: “The fact that this case was by no means clear cut also goes to show how important it is that IR35 status is set with care and after careful consideration of the written contract and a review of the working practices. Contractors, along with hiring organisations and recruitment agencies, need to be acutely aware of this when deciding if the service provided reflects self-employment or employment.
‘It also shows the significant sums that are very often at stake in these tax cases, with Mr Hawksbee now expected to repay a reported £140,000 to HMRC. It’s why, for this very reason, contractors choose to protect themselves with IR35 insurance. It’s also why many private sector companies, that will carry the risk next year, are encouraged to do the same.”
Wider implications of HMRC’s win “unclear”
Meanwhile, Director of Stop The Off-Payroll tax campaign, Dave Chaplin, called HMRC’s IR35 case win “surprising” and “unexpected”. He also explained that “some careful analysis will be required before drawing any firm conclusions on how it will impact IR35 and Off-Payroll for more traditional based contractors in IT and engineering.”
However, when expanding on the potential implications of HMRC’s victory on traditional contractors, Qdos CEO, Maley believes “it’s worth pointing out that Mr Hawksbee’s engagement – like many other presenters who have faced an IR35 investigation – is quite different from a typical contractor’s. In our experience, the vast majority of contractors are genuine and belong outside IR35.”
HMRC win £140k
But at what cost ?
HMRC have spent 10’s of millions chasing IR35 non existent cases
With the freelance market in free fall and rates back at late 1980’s levels and the new zero rights employment status
This puts maybe the final nail in freelance working in the UK