Lorraine Kelly - what we can take away from this case Lorraine Kelly - what we can take away from this case
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    Default Lorraine Kelly - what we can take away from this case

    We heard today that a national favourite, Lorraine Kelly, succeeded against HMRC's claim that her engagement on the 'Lorraine' show through her PSC, 'Albatel Ltd.' was not caught by the controversial IR35 legislation (Chapter 8, Part 2, ITEPA 2033).

    There'll be plenty of commentary on this case; here are my thoughts.

    1. No new principles were established here. That is not much of a surprise, this being a hearing of the First-Tier Tribunal (and not binding on any other tribunal or court).

    2. Lorraine Kelly's case appeared to have real merit and yet HMRC pursued it doggedly through ADR and on to appeal, losing solidly on all material points.

    3. Inevitably, comparisons will be made with the Christa Ackroyd case (a rare win for HMRC on IR35 in recent times). Like Lorraine Kelly, Christa Ackroyd was a big name, in front of camera 'talent'. I don't watch much TV myself (Netflix, when I do...) but I understand that Lorraine Kelly has more of a national presence and brand. Nevertheless, both put forward similar points; they were brands in their own right, they were in business on their own account, they were subject to only limited control (and much of that in order to comply with overarching broadcasting regulations), both provided their own resources and both did their own preparatory work.

    On my reading, the differences between Lorraine Kelly’s and Christa Ackroyd’s cases were ones of degree rather than nature. The former was a bigger name, had more external business, was subject to less control and did more preparatory work on her own account and so on.

    Where does that leave individuals, public bodies and (in the future) private engagers? It does little to help define the boundaries of IR35 and emphasises the 'you'll recognise it when you see it' approach. Unfortunately, unless we get a comprehensive ruling from at least the Court of Appeal which provides a clearer approach (or new legislation), nothing will change on this front.

    4. Judge Jennifer Dean, in her judgment, drew guidance from Henderson J's formulation of the approach to take when it comes to the intentions of the parties, which is a fair approach as it is perhaps the most senior judicial guidance on the point (being a decision of the High Court). Dragonfly Consultancy Limited v HMRC [2008] EWHC 2113 (Ch).

    Yet, as I discussed in Taxation magazine (Issue 4676, 11 Dec. 2018), the authorities on the importance of the intentions of the parties are far from being in agreement. I argued that the intentions of the parties should in fact be very important (rather than marginal) because, as a matter of fundamental law of contract, a contract can only exist where the parties agree and only exists to the extent that they agree. As Lord Clarke put it in the Supreme Court judgment in RTS Flexible Systems Limited v Molkerei Alois Müller GmbH & Company KG (UK Production) [2010] UKSC 14, at paragraph 45, ‘Whether there is a binding contract between the parties, and if so upon what terms, depends upon what they have agreed.’

    In Pimlico Plumbers Ltd and another v Smith [2018] UKSC 29, an employment case, it was significant that the parties embraced the individual's self-employed status. That case involved a direct, rather than a notional contract, of course.

    In my article, I said this: 'IR35 applies if the ‘worker’ would have been ‘…regarded for income tax purposes as an employee…’ By virtue of ITEPA, s 4(1), this means ‘…employment under a contract of service [or apprenticeship or service of the Crown]’. Hypothetical it may be, but the relationship is contractual in nature.’

    How can the intentions of the parties be anything less than a significant and material element in determining what the notional contract would have been?

    It is a shame to say it but IR35 remains a difficult and woolly area and yet, for all of that, still very technical indeed. As we move toward the roll-out of IR35 reforms to the public sector, everyone involved needs to think hard about the advice they should seek to protect themselves from enquiry.

  2. #2

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    Default BBC : Lorraine Kelly wins £1.2m tax case against HMRC

    Also reported on BBC
    Lorraine Kelly wins £1.2m tax case against HMRC over ITV work
    Lorraine Kelly wins GBP1.2m tax case against HMRC over ITV work - BBC News

    TV presenter Lorraine Kelly has won an appeal at a First Tier Tribunal (FTT) over a £1.2m demand for unpaid income tax and National Insurance contributions (NICs) arising from a challenge to her employment status under IR35

    Albatel Ltd v Revenue & Customs (INCOME TAX/CORPORATION TAX : Personal service companies (IR 35)) [2019] UKFTT 195 (TC) (16 March 2019)

    Albatel appealed HMRC's decision on the basis that the nature and range of Kelly's work meant that she should be treated as a self-employed star. Kelly argued that she was a freelancer, saying that she decides her own hours, what items should be included in the show and when she works. She does not receive sick pay or a pension, and there is no guarantee that her contracts would be renewed.

    ITV is under no obligation to pay Kelly if she is unable to present the show. Kelly is not provided with office space and explained that she carries out her preparation at home. In the hour that Ms Kelly is contracted to work she stated she had total control; any additional work related to the show is her choice.

    Any requests to appear as a guest on another ITV show would go via Kelly’s agent and be subject to separately negotiated contracts. Kelly highlighted that she is taken off air when a new story breaks, such as the terror attacks in London and the Grenfell Fire
    Last edited by eazy; 21st March 2019 at 09:56.

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    Thanks for the write up.

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    Have been reading some of the tribunal documents this morning. Seems like she had a reasonably strong case to me, HMRC yet again screwed up.

    Unfortunately the media seem to have chosen to focus on one small aspect of the case (that her being a "performer" meant her agency fees were deductible) rather than the bigger picture.

    Cue lots of people on Twitter moaning about how she's a tax dodger and that she's just avoided paying £1.2m in tax (that she was never due to pay anyway).

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    Quote Originally Posted by TheCyclingProgrammer View Post
    Have been reading some of the tribunal documents this morning. Seems like she had a reasonably strong case to me, HMRC yet again screwed up.
    Bodes well for all the poor Private Sector companies, and all the poor heads within to understand...

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    Quote Originally Posted by simes View Post
    Bodes well for all the poor Private Sector companies, and all the poor heads within to understand...
    Were you born in like the 1800's or something?
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    Cases determine don their own merits rarely assist anyone else. As has already been observed, this appears to have been quite a strong case for the taxpayer with many of the key features pointing away from employment. While I wouldn't want to be seen to support HMRC on these venerable pages, they were on a hiding to nothing here.

    Take a weak case and lose - and be castigated for it.
    Don't take the case, leave all the contractual detail private - be accused of some sort of cover up and be castigated for that.

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    Quote Originally Posted by piebaps View Post
    Take a weak case and lose - and be castigated for it.
    Don't take the case, leave all the contractual detail private - be accused of some sort of cover up and be castigated for that.
    Yes, you have a point. They couldn't win, could they?

    If only HMRC hadn't created the situation with their faux 'fairness' rhetoric, their statements in the press about tax avoidance, their doubling-down on a complex and hard to implement piece of legislation, their refusal to actually consider simplifying the thing or to legislate something that would take some of the uncertainty away, etc, etc.

    It's a broken and flawed piece of legislation that they themselves can't even get right, that half the cases they bring they lose, and that many people aren't sure whether they are compliant or not, and sort of hope they are. They've made it almost impossible for everyone to be absolutely sure they are implementing it properly. They've done that on purpose, I suspect, so that some who don't implement will do so out of Fear, Uncertainty, and Doubt.

    If this case existed in isolation one could almost feel sorry for them. Since it isn't in isolation, I can't quite summon up any tears of sympathy for them.

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    The case is getting an airing on various platforms and stripped of the usual "all tax dodgers should surrender all their assets and money to HMG immediately, go to jail, sell their children and seek forgiveness for their sins" brigade, the balance of opinion is that HMRC not only had a poor case but presented it badly.

    The key difference between the Kelly case and the Ackroyd case is the absence or presence of "control".

    In the context of the hypothetical contract envisaged by the legislation, it was clear that the Ms Kelly had almost total control as to what was included in her shows, for how long, when and under what circumstances. Yes she had to fit the guidelines of OFCOM but her editor had limited input otherwise, mainly it seems being there to make the logistics works.

    Ms Ackroyd failed to demonstrate such a degree of control. Her operating guidelines were much more rigid both by the BBC code of conduct and the fact that the show was a regional news piece that had a fixed format.

    I understand that Ms Ackroyd is/has appealed but have no idea of the outcome.

    For me the hypothetical Kelly contract was close to a "statement of work" type approach where outcomes were critical (audience numbers) whereas Ms Ackroyd was primarily on a services contract which is perhaps more akin to an employment.

    The one baffling thing to me is why nobody in HMRC looked at the facts and realised it was unwinnable. Even after HMRC tried their dirty tricks - spotted and remarked upon by the Judge - they coudl not win it.
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    Quote Originally Posted by webberg View Post
    The case is getting an airing on various platforms and stripped of the usual "all tax dodgers should surrender all their assets and money to HMG immediately, go to jail, sell their children and seek forgiveness for their sins" brigade, the balance of opinion is that HMRC not only had a poor case but presented it badly.

    The key difference between the Kelly case and the Ackroyd case is the absence or presence of "control".

    In the context of the hypothetical contract envisaged by the legislation, it was clear that the Ms Kelly had almost total control as to what was included in her shows, for how long, when and under what circumstances. Yes she had to fit the guidelines of OFCOM but her editor had limited input otherwise, mainly it seems being there to make the logistics works.

    Ms Ackroyd failed to demonstrate such a degree of control. Her operating guidelines were much more rigid both by the BBC code of conduct and the fact that the show was a regional news piece that had a fixed format.

    I understand that Ms Ackroyd is/has appealed but have no idea of the outcome.

    For me the hypothetical Kelly contract was close to a "statement of work" type approach where outcomes were critical (audience numbers) whereas Ms Ackroyd was primarily on a services contract which is perhaps more akin to an employment.

    The one baffling thing to me is why nobody in HMRC looked at the facts and realised it was unwinnable. Even after HMRC tried their dirty tricks - spotted and remarked upon by the Judge - they coudl not win it.
    I suspect they never intended to. As with the Jimmy Carr case, despite a technical win for the individual it reinforces HMRC's "message" that we should all be paying what they tell us we should pay.
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