'Astonishing' IR35 defeat for Eamonn Holmes tipped for appeal

Control and Mutuality unravelled Eamonn Holmes’ claim that “there’s nobody more freelance than me,” in a IR35 win for HMRC that is surprising more than just the tele star.

In fact, reacting to the verdict in Red, White and Green Ltd V HMRC, the founder of contractor tax advisory Pendragon Consultancy called the loss for Mr Holmes “astonishing”.

Writing online, the advisory's Janet De-Havilland explained that her own verdict on the Holmes verdict was justified “considering Eamonn has been a freelancer for over 40 years.”

'Answerable to no one but himself'

It is Mr Holmes’ long, successful career, including 15 years at This Morning on ITV – the engager in the case, plus other clients, that led to his ‘nobody more freelance than me’ comment, pre-trial.

He kept up such a stance in front of judge Harriet Morgan, telling her and HMRC that he is “answerable to no one but himself...a gun for hire -- on my terms”.

Pointing to stints with Sky News, Channel 5 and other broadcaster, Mr Holmes described himself as an “impact player” who “bring[s] something to a programme rather than the other way about”.

However, as the tax bill he now faces of a reported £250,000 indicates, having multiple broadcaster clients is “not necessarily” evidence of Mr Holmes' self-employed status, says WTT Consulting.

Addressing some of the ‘astonishment’ that Mr Holmes lost (and some of the initial press reports on the verdict), the tax advisory pointed out that actually, he worked for just one firm.

'What IR35 says'

“Mr Holmes worked [solely] for his personal service company, [RWG which] supplied him to [the] multiple broadcasters,” begins WTT’s director of tax investigations Tom Wallace.

“[But] the Intermediaries legislation says that each of those engagements must be looked at as though the PSC was not in the chain and decide if, without it, there would be an [employment] contract….If the answer is yes, then it is inside IR35.”

Despite Mr Holmes’ contracts potentially being seen as a boon (the ones which HMRC probed with ITV were for the 2011/12 and 2014/15 tax years), they raised aspects of IR35 case law which actually went against the presenter.

“The fact remains that Mr Holmes worked on This Morning during a series of relatively lengthy contractual periods of 12 months, as regards the first year”, Judge Morgan began.

“And, 10 to 11 months in the other years, [meaning] that the mutuality requirement was satisfied throughout these periods -- and that he in fact worked on the show during these periods on a regular and consistent basis”.

'Substantial income'

Mr Holmes’ gaps in between the contracts were not found to be self-employment indicators, and a “number of problems” (such as his “substantial income from it”) prevented his This Morning work appearing as “part of a wider self-employed business activity.”

More fundamental to a finding of Mutuality, on each ITV contract, Mr Holmes was expected to work a minimum number of days dictated by the broadcaster, and would be paid a fixed fee per show -- regardless of whether he did the show.

In a case analysis exclusively today for ContractorUK, status specialists Qdos indicates that these strong signposts to 'MOO' were fundamental to Mr Holmes’ defeat, even though Mutuality represents just one part of the ‘IR35 holy trinity.’

'I am my own creation'

Problematically for Mr Holmes and his legal representative, Robert Maas of accountancy firm Carter Backer Winter, the strongest of the trinity’s two other factors, Control, also existed.

And probably much to the annoyance of the “anchor man,” “specialist” and “best live television presenter in the country --” all phrases Mr Holmes used to describe himself, because he spent a great deal of his evidence refuting Control.

In fact, he told judge Morgan that he was 'not there' (on ITV’s This Morning) ‘to follow other people’s rules’; that he “controls” the show because, “I am my own creation….not anybody’s slave”.

So “it is me telling them what to do, not the other way around” and “in practice I dictate” the programme, meaning “anyone who’s in the studio with me needs to hold on to my coat tails”.

Furthermore, Mr Holmes exampled that if he were to “say something that the producers felt to be unacceptable, there is nothing they could do” because he “runs his own ship,” and does not read from an ITV-typed autocue.

'Considerable autonomy'

Eventually, the self-described “totally freelance” journalist did convince the judge that he had – in her words, “considerable autonomy,” such as over how he prepared and presented the show.

Yet he had no control over what the show would cover or who he would interview.

More fatally, “RWG was required to acknowledge and procure that Mr Holmes acknowledged that ‘[ITV] shall have absolute discretion and control over the editorial content of the Programme and to the Products of [Mr Holmes’] Services,” the ruling says.

Similarly, RWG assigned to ITV all relevant copyright and moral rights, giving the broadcaster “unlimited right to edit, copy, alter, add to, take from, adapt and/or translate the product of Mr Holmes’ work.”

'Sufficient mutuality, control'

ITV also placed some restrictions on RWG’s activities and although the company still had "numerous" other clients (at least seven separate engagers are identifiable from the judgment), the restrictions affected the type of work Mr Holmes could undertake.

The restrictions extended too to how he dressed, with the broadcaster having the “final” say on his clothing during the show.

Even the obligation which Judge Morgan found -- for Mr Holmes to accept the work, and which ITV was found obliged to provide, was a further 'Control' indicator.

The judge said: “I have concluded that there was sufficient mutuality and at least a sufficient framework of control to place the assumed relationship between ITV and Mr Holmes in the employment field.”

Also, Mr Holmes was, “ultimately”, part of ITV’s team, used none of his own equipment (except an earpiece) and had to make notifications/seek permissions with the broadcaster about his other commercial work.

Seeming to seal HMRC's case, Personal Service – the third factor of IR35’s ‘holy trinity’ – was present, as ITV said it would not accept another party in the event that Mr Holmes was “unavailable.”

'Won't set a precedent'

“The vast majority of contractors’ engagements will be very different from this one and Mr Holmes’ defeat will not set a precedent,” reflected Qdos CEO Seb Maley.

“It’s also no secret that HMRC has its sights set on high-profile cases ahead of IR35 reform on 6th April. The tax office wanted to make a statement with this win, but let’s not forget HMRC still has a woeful IR35 tribunal track record and clearly struggles to grasp the very rules it created.”

During his appeal, Mr Holmes hinted that the Revenue merely accusing him of being a ‘disguised employee’ would be a statement enough, because he is regarded very differently.

'Shocked'

In particular, as he is widely seen as a “one-man band….responsible for what I do and where I do it”, his industry colleagues would be  “shocked” if he were classified as ITV staff, he said.

That perception of Mr Holmes -- and his insistence during the case that he called the shots at ITV,  appears to be why WTT’s tax investigations director Mr Wallace believes an appeal is likely to be incoming.

“This was an FTT decision and while no appeal [has been] made yet I would be surprised if there was not,” he said.

'Pull the finger out'

Other contractor sector advisers are more exercised about what the taxman’s IR35 win over the tele personality might mean for their own clients.

Sounding potentially concerned about the contractors it places, a recruitment source said: “This case highlights the importance of reviewing contracts with clients and ensuring there is no ambiguity when it comes to Mutuality.

“Obviously, with just over a month to go until the revised regulation comes into effect in the private sector, anyone who hasn’t got their ducks in a row yet, really needs to pull the finger out, soft intro or not.”

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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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