Talksport presenter Paul Hawksbee beats IR35 case, just
A Talksport presenter has won his IR35 appeal against HMRC in what experts say is both a typical and atypical status judgment.
Paul Hawksbee, director of Kickabout Productions Ltd, would have had to pay £140,000 in taxes for a three-year stint out of his 18-year career at the radio station, if HMRC had won.
But unusually, rather than reject HMRC outright -- which has happened in five of the last six IR35 cases, the tribunal itself could not agree, prompting the judge to use his casting vote.
Even so, dissenter Charles Baker (who backed HMRC) said that on a ‘broad-brush review of PSC cases like Ackroyd and Adams,’ finding Mr Hawksbee to be outside IR35 ‘would not be anomalous.’
The Revenue isn’t so sure. A spokesman told ContractorUK yesterday that HMRC is “disappointed” with the ruling in favour of Mr Hawksbee, and is considering whether to appeal.
If there is a next time around, IR35 experts suggest that the tax authority might want to brush up on its understanding of how its Intermediaries legislation actually operates.
“This case raises serious questions about HMRC’s understanding of particular aspects of IR35,” says Qdos Contractor, a tax advisory specialising in employment status and IR35.
Evidencing his claim, the advisory’s Seb Maley said that three classic status tests, all of which HMRC said pointed to Mr Hawksbee’s employment by Talksport parent Wireless Group, were not conclusive enough to prove the department’s case.
On Control; the tribunal found that the radio host, presenter and scriptwriter was “afforded an extremely high degree of autonomy…save for the regulatory and advertising constraints.”
But serving as a counterbalance, editorial control was found to rest with Talksport, as it had the contractual right to “edit, control or delete” The Show, which Mr Hawksbee co-anchored.
On Mutuality; the tribunal decided that Talksport not being obliged to provide work to Mr Hawksbee was the key, more so than an expectation he would perform a minimum number of shows.
“A full-blooded employment relationship would typically require an employer to provide work to the employee,” it said, “not merely for the employee to be obliged to undertake it.”
'Opportunity to profit'
And on Financial Risk, which is less determinative but clearly helped Mr Hawksbee, the tribunal saw the upside of Talksport paying him a fee per show, regardless of his research and prep time.
It also rejected HMRC’s claim that he had no “opportunity to profit”, with judge Thomas Scott saying the radio host could do so by performing well, thereby enhancing his reputation to prospective clients, who then became customers like the BBC, ITV and Dave.
“Looking at the picture as a whole,” began the judge, in the standard but often vitally important ‘standing back’-type assessment (which helped Kaye Adams win her IR35 case), “we conclude that the relationship in this case was not one of employment but rather was a contract for services.”
'Burden of proof'
The judgment continues: “We acknowledge that others might not reach this view, as illustrated by the fact that our decision is by casting vote of the judge, but we are clear that the taxpayer has discharged its burden of proof in this appeal.”
The fact that lay member Mr Baker and judge Scott did not see eye-to-eye on Mr Hawksbee IR35 status was not lost on the judge, who hinted it speaks to the complexity of IR35.
And it is a complexity, that the government has a unique opportunity to clear up, the judge signalled in a surprise message to policy-makers.
“The reforms to the off-payroll working rules are also due to be implemented next year. In our view, increased clarity is badly needed,” he wrote in his judgment.
“We were referred to and considered over 50 decisions relevant or said to be relevant to the issues before us, often decided some time ago when working practices may have been very different
“In addition, two of the leading authorities, Ready Mixed Concrete and Market Investigations, are some 50 years old, with the terminology of ‘master and servant’ more redolent of another era. The resultant uncertainty in relation to employment status is highly unsatisfactory.”
Status review company Bauer & Cottrell last night sounded taken aback at the judge’s intervention. And his near perfect timing.
'Let's hope someone's listening'
“Everyone is calling for government and HMRC to delay the off-payroll rules for the private sector and to join everything up with the Good Work Plan, and now the tax tribunal has joined in the call.
“This case was published just days before the imminent draft Finance Bill and let’s hope someone has been listening,” says the company’s co-founder Kate Cottrell. “It’s time for a joined-up approach to deciding IR35 and status generally.”
However, getting rid of the 1968 ‘Ready Mixed’ case – identified by the judge as showing its age – might be regarded by some PSCs as a step too far in any case law modernisation.
“As per the Ready Mixed Concrete case, only one of the ‘trinity’ of status tests needs to be in the favour of the contractor for them to be considered outside IR35,” Qdos’s Mr Maley said in a statement.
“[And while ] there was no Substitution, so Substitution was not in Mr Huckabee’s favour (although the argument was that the nature of work – i.e. it was his show – made that irrelevant), this particular case put great emphasis on the additional factors, such as Financial Risk and Integration.”
But he too believes that change to the current approach which HMRC endorses for assessing IR35 status is overdue.
“The fact that Mr Hawksbee’s engagement would almost certainly be deemed inside IR35 by HMRC’s IR35 tool is yet another indication that it is not fit-for-purpose,” said Mr Maley. “[That’s] despite [it] having been in operation [now] for over two years.”
Ms Cottrell, who used to work for the Revenue, agrees that the tool cannot be right because it would have got Mr Hawksbee’s status wrong.
Dumbfounded, and with an eye on the April 2020 rollout she asked: “How on earth can an engager be expected to make the IR35 decision using the discredited CEST tool?”
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