HMRC scrapes IR35 win against BBC presenter trio who owe £920,000

HMRC has finally, narrowly, defeated three BBC presenters on IR35 because they were akin to employees and owe £920,000, even though it was the broadcaster who forced them to use PSCs in the first place.

Joanna Gosling, Tim Willcox and David Eades say they are “disappointed” by an FTT ending their eight-year “stressful” battle with HMRC, by ruling them inside IR35 for their 2007-2014 BBC contracts.

But the FTT judges were split 1/1 and the case was only lost for the trio on the casting vote of the more senior judge, the presenters’ adviser David Kirk pointed out to ContractorUK last night.

'Judges clearly having difficulty'

“This is an extremely rare occurrence in the tax tribunal – I only know of two other cases where it has happened since the tribunal was set up ten years ago,” he said. 

“Curiously, one of them was an IR35 case involving the radio presenter Paul Hawksbee. So it was obviously close [for the trio], and the judges are clearly having difficulty with this issue.”

Joe Tully, of Brookson Legal said: “Three High Court judges were unable to agree here, which shows how complex the IR35 rules are. [They] can be extremely difficult to interpret”.

'How unfair'

Julia Kermode, CEO of the Freelancer and Contractor Services Association, agrees and sees implications for April 2020.

“Given that two tribunal judges took opposing views… surely this just goes to illustrate how unfair it is to expect businesses [from April 2020] to make IR35 determinations themselves.

“If FTT judges can't reach an easy conclusion, how on earth can firms -- without access to expertise be able to reach a conclusion?”

'Much more control'

Underlining just how not easy the decision for the judges was to reach, a few of the contracts of BBC World presenter Tim Willcox were actually found by the FTT to be outside IR35.

When hosting programmes on World, Willcox was found to have “much more control” than on the BBC’s flagship shows as he would “write headlines” and do “my own interviews.”

Also, Willcox tended not to discuss questions or areas of the segment with BBC employees beforehand because, as he submitted, he had “total editorial freedom about what I ask”.

'By no means a Revenue pushover'

“It is significant that the casting vote was decided on two key employment status tests: Mutuality [and]…Control,” said Mr Tully, Brookson Legal’s managing director.

“We did not lose on all the contracts,” reflected Mr Kirk, referring to the few BBC World engagements of Mr Willcox. “[So] it was by no means a Revenue pushover.”

Moreover, the FTT rejected HMRC’s case of trying to prove ‘carelessness’ on the part of the presenters and their accountants, so for PAYE, HMRC can go back only four years, not six.

'Pleased and relieved'

Broadly, not putting forward enough evidence was HMRC’s undoing, even though it emerged that Mr Willcox and Ms Gosling did not recall their accountants mentioning IR35. 

In Mr Eades' case, his adviser considered IR35, didn’t use HMRC’s Contract Review service but decided IR35 did not apply -- not grounds, on its own, to imply 'carelessness.'

“We are both pleased and relieved to say that the tribunal has…found that we acted in good faith, dismissing HMRC’s claim that we - or our accountants - were careless about our tax affairs in any way,” the presenters said, adding:

“As a result, the tribunal ruled that HMRC could not pursue its tax demands for a number of the years in question. We are delighted that our accountants were also deemed to have acted in good faith throughout. Given some of these findings, we are considering with our legal advisers whether to appeal.”

'BBC forced the presenters into PSCs'

The presenter trio were further vindicated on another of their claims that were disputed in what they called their “depressing” eight-year battle.

Not disputed by HMRC however, but by their engager -- the BBC, yet it is not the broadcaster which was on trial.

The tribunal judges have finally put the matter in question -- whether limited company usage was mandated -- to rest.

“The imbalance of bargaining power is a significant factor. The BBC were in a unique position and used it to force the presenters into contracting through the PSCs.”

And, the judgment adds, “to [force the presenters to] accept reductions in pay.”

'Difficult to lable as guilty'

Seb Maley, chief executive of Qdos said: “It’s of real concern that at present these individuals look like they will be made to pay vast sums to HMRC, despite the judges finding they were ‘forced’ into working as self-employed by the BBC.

“The onus should be on the engager to settle, not the presenters, who it's very difficult to label as guilty.

“With around 100 other BBC presenters in the same boat, we could see similar verdicts in time. However, each case needs to be examined on its own merit. And if it’s decided the BBC left someone with no choice but to work outside IR35, then these individuals must be helped financially.”

In line with Mr Maley’s recommendation, the presenters said yesterday  that they were “very pleased” that the BBC has “acknowledged its responsibility for these contracts, and has publicly declared its intention to resolve the outstanding demands from HMRC.”

'Never a matter of choice'

A HMRC spokesman declined to comment on that arrangement, and would only say of the case that it “welcomes” the FTT’s judgment that the three BBC presenters were caught by IR35.

“Employment status is never a matter of choice,”  the Revenue spokesman also said, which seems ironic given that the BBC presenters were not given a choice by the BBC about using a limited company.

The HMRC spokesman continued: “It is always dictated by the facts and when the wrong tax is being paid, we put things right.

“It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and National Insurance contributions as employees.”

'HMRC will feel encouraged'

Despite losing its ‘carelessness’ case against the presenters, and having one tribunal judge disagree with its status assessments, HMRC is likely to fully embrace the IR35 win (overall), given that it has lost the lion’s share of recent IR35 cases.

“After some high-profile IR35 defeats for HMRC, it will likely feel encouraged by this latest ruling,” said Brookson Legal’s Mr Tully.

“With the changes to the IR35 rules planned for April 2020, HMRC is asking businesses in the private sector to apply these extremely complicated rules themselves.

“It will then be hirers that HMRC holds responsible for taking reasonable care in making correct employment status assessments. This public sector example could well inform similar claims in the private sector if hirers do not take the time to properly prepare for the rule changes.”

Andy Chamberlain, deputy policy director at IPSE said: “We remain at a loss how the Treasury expects medium-sized businesses to accurately apply IR35 to their contractors from next year when HMRC and tax judges struggle.”

Editor's Note: It is understood that the presenters do not owe £920,000 in practice, although this was the figure HMRC was pursuing. Two-thirds of this sum has been paid (largely in the form of corporation tax which the presenters will now get back), and most of the remainder is Employer's NICs. Meanwhile, a figure between £200,000 and £300,000 has reportedly been settled on and agreed by the presenters. This figure is that which the BBC has signalled its intention to help the presenters pay. 

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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