Commentator and former professional tennis player on the hook for unpaid taxes as a result of representative’s error
Former tennis player, Barry Cowan, has lost his chance to appeal an IR35 decision as a result of his representative failing to meet an HMRC deadline.
The ruling, which was announced on the 18th of April, was related to a decision issued by HMRC in January 2022, when Cowan was investigated for alleged non-compliance.
HMRC took the view that he should have been operating inside IR35 when engaged as a freelance commentator by Sky across several contracts, from the 2014 to 2019 tax years.
The tax office issued this opinion on 18th June 2021. Cowan’s advisor raised “23 points of dispute” in response – a list that was “not exhaustive” – contending that “the decision was unsafe and completely incorrect”.
The representative also “challenged HMRC’s use of communications between HMRC and Sky to which the Applicant was not privy”, and requested copies of the documents.
Despite the concerns raised during this exchange, the tax office later issued its formal decision via a ‘view of the matter’ letter on 8th December 2021. This letter also notified Cowan and his counsel of the 30-day window in which the decision could be appealed.
Representative “continued to make complaint”
On the same day, Cowan’s representative complained that HMRC had “failed to respond at all to any of the points we have raised”, calling into question the integrity of the investigation. He also requested the same documents again, though there was a “considerable delay in obtaining disclosure”.
Despite repeated correspondence up to and after this point, however, Cowan’s advisor failed to request an appeal within the specified timeframe. This was partly due to the fact “that December and January are busy months for the representative”.
In January 2022, HMRC stated that “the dispute was treated as settled”, as it had received no request for appeal. Another exchange of emails followed before a late request for appeal was made, in mid-March 2022.
However, tribunal judge Amanda Brown KC noted that “the Applicant’s representatives became increasingly frustrated” with HMRC’s initial enquiry.
“Rather than seek to remediate the position as soon as possible the representative continued to lock horns with what he considered to be the outrageous conduct of HMRC”, the case notes state. “He did not appeal but continued to make complaint to HMRC”.
The judge ultimately ruled that she would not grant permission to appeal. Brown found “it was clear that HMRC considered the time limit to have expired” at the point when Cowan’s advisor requested an appeal.
The mistake will likely leave Cowan with a significant tax bill covering the tax years in question.
HMRC not “treating taxpayers fairly”
“Losing a fight on a procedural point, without even stepping into the ring, will obviously be very disappointing for Mr Cowan”, he said.
However, Chaplin was also sympathetic. “Reading the ruling, it appears an opinion was formed by HMRC, without the taxpayer having full access to the material upon which the opinion was made”, he said. “That doesn’t chime with the concept of treating taxpayers fairly”.
Chaplin also noted that Cowan’s advisor isn’t the first “to fall foul of the basics”, referencing Michael Lynagh’s case earlier in the year, which followed a similar pattern.
Andy Chamberlain, Director of Policy at IPSE, said the “complexity” of the IR35 rules “often leads to HMRC making dubious decisions”.
“Tribunal judges frequently disagree with HMRC’s arguments” as a result, Chamberlain said, and so it is “often worth challenging them”.
“But it’s essential that anyone who wants to dispute a decision ensures they follow the correct procedure. It is all too easy to make a procedural mistake which can completely undermine the appeal”.
“Most frustratingly for Mr Cowan, it appears that is what has happened in this case”, Chamberlain concluded.