IR35: With secondary factors as his props, Stuart Barnes got over the line with ‘in-business’

Do in-business factors really matter? That’s the question. At least, that’s the question I’ll try to answer here, because that’s the question which in ContractorUK’s coverage of the IR35 victory of Sky Sports commentator Stuart Barnes, an expert on rugby, advisers appeared to tussle over, writes Nikola Nowak, tax consultant at Markel. 

Being in business on your own account: recap

Before Barnes, a bit about in-business -- or as it’s also called ‘Being In Business On Your Own Account.’

Being self-employed comes with a plethora of benefits. Whether it be financial or creative freedom, self-employment provides a greater degree of independence.

But with great power, comes great responsibility. You become liable for any defective, late, or sub-standard work, for any accidents that occur during the provision of the services and for any tax liabilities.

While in-business factors like these leave you potentially exposed to risk, they strongly indicate that you are not an employee of your client, and so they work in your favour in terms of IR35 status. Demonstrating that you acknowledge risks and plan ahead for these is a healthy pointer towards self-employment and achieving outside IR35 status.

S&L Barnes Ltd Vs HMRC: A fixture for in-business pundits not to miss

Stuart Barnes is a former international rugby player who made his England debut against Australia in November 1984. He gained ten caps for England and played his last international match in 1993 against Ireland. The Sporting Heroes website describes him as a true genius of the game.

Even with such a strong list of achievements, Barnes will likely regard his victory at the First Tier Tax Tribunal as one of his big career successes, not least because his successful appeal saw him fend off a £695,000 tax demand over his IR35 status. Quite the hand-off.

Starting in 1994, Barnes provided commentating services to Sky TV Ltd, as well as rugby columns for The Times and Sunday Times through his personal service company, S&L Barnes Limited (SLB).

Sky engaged Barnes for his expertise, reputation, and unique insights into rugby – insights available only to individuals with an incredibly refined understanding of the game made possible through first-hand experience of playing rugby professionally.

The courts found that the terms of the contract between Barnes and Sky for the live rugby commentating services obliged Barnes’ personal service, and they found there was a sufficient framework of control to satisfy employment.

So how is it possible that IR35 wasn’t in play?

When looking at an engagement from a status perspective, the courts scrutinise the presence or absence of in-business factors to establish whether the worker is ‘in business on their own account,’ and whether they have the ability to profit from sound management. This forms the third aspect of the irreducible minimum from the Ready Mixed Concrete judgment:

“The other provisions of the contract are consistent with it being a contract of service.”

Therefore, if the ‘other’ provisions are inconsistent with a contract of employment, then the engagement is unlikely to be employment.

SLB’s win

It was found by the FTT that Barnes was in business on his own account and therefore he could not be an employee of Sky:

• He was not financially reliant on Sky during the tax years in question (there was substantial income from other clients).
• The services he provided were different to the services of his colleague, Miles Harrison (a presenter employed by Sky).
• His success or failure depended on his profile, which required a significant effort on his part. For example, Barnes used his presence at the live games as a fact-gathering exercise for his articles. This suggests he was more than ‘just a commentator’. 

Additionally, the FTT judge commented on the volume of research Barnes undertook outside of his engagements, to ensure the quality of his commentating, stating:

“It was the one and the same enterprise of being ‘Stuart Barnes, the voice of rugby.'”

In the same vein, the 31 articles published by Barnes during the 2015 World Cup “illustrate the competitiveness of the field to maintain parity as a sought-after sport pundit”.

‘Propped’ up by secondary factors

This judgment places an incredible amount of weight on secondary factors, and yet I find myself agreeing with the conclusion.

Even though the key employment tests were present, I cannot imagine Stuart Barnes being an employee of Sky, nor do I think the articles he wrote were under an arrangement which resembled employment. Barnes is a rugby expert on and off the pitch and as mentioned in this judgment, risked his reputation – and therefore his livelihood -- every time he went live on air. 

While determining status should never be a tick-box exercise, the format we are used to seeing has not been followed in recent presenter and commentator cases. Ordinarily, with all three of the status tests present, we would not expect the case to be overturned on the presence of ‘in-business factors.’

And yet, SLB successfully tackled HMRC’s contention that IR35 applied.

This must lead us to conclude that, yes, in-business factors really do matter. These features of a contract demonstrate that you are an independent business, and in borderline cases, this third test may be crucial in coming to a decision.

This commentator’s final thought…

Despite the fact Barnes was able to hoof it downfield by demonstrating he was in business on his own account, I would be interested to see if HMRC appeal the decision and ‘try’ again on account of the tribunal’s finding of both personal service and control.