What the IR35 defeat of Kickabout Productions Ltd means for contractors

Kickabout Productions Limited (KPL), another IR35 case involving a presenter, was appealed by HMRC to the Upper Tribunal (UT) following the First-tier Tribunal (FTT) ruling last year. 

As some ContractorUK readers may remember, the FTT decision was somewhat unusual as there was a clear difference of opinion between the presiding judge and the other member of the FTT, as to the interpretation of relevant case law. 

Numerous volleys

HMRC lodged numerous grounds of appeal, citing in the main that the FTT erred in law in reaching its conclusion.

Crucially, this case centred around Mutuality Of Obligation (MOO). As a tax adviser who has railed against HMRC’s opinion of MOO for many years, I welcomed the attention to MOO in the recent UT case, The Commissioners for HM Revenue and Customs v Professional Game Match Officials Ltd, and so approached the rematch of Talksport presenter Paul Hawksbee’s KPL versus HMRC with optimism, writes David Harmer, associate director of contractor solutions at Markel Tax.

To the victor (loser and onlookers), go the spoils

Of course, from an adviser’s perspective all cases, regardless of the victor, can provide useful tools for defending against future HMRC challenges. The new judgment in KPL versus HMRC however, does not provide the clear and useful commentary on MOO that we saw in the PGMOL case. This was due, in large part, to the established facts of the case.

Let’s take a closer look. There were two actual contracts between Talksport and KPL which the UT examined to ascertain the terms of the hypothetical contracts. Both contracts imposed an obligation on KPL to provide the services of Mr Hawksbee for a minimum of 222 shows a year. 

While there was a contractual provision that stated that Talksport were not obliged “assign Services” to KPL and KPL was not “obliged to accept the assignment of Services”,  the UT found this to be inconsistent with KPL’s obligation to provide a minimum of 222 days’ work under the same contracts.  With a contractual obligation on KPL to provide services for 222 shows, there was an inherent reciprocal obligation that Talksport must provide those 222 shows to KPL.

Not a difficult decision, despite the skirting

This contractual provision was sufficient for the UT to conclude there was an obligation to be provided with work and a reciprocal obligation to undertake the work. If we also consider that there was no clear contractual right for Talksport not to provide any work and the fact there was a four-month notice period, then it is not difficult to see how the UT came to the decision.

While the judgment skirts very closely around the edges of HMRC’s view that mutuality can be established by agreeing to work in exchange for pay, as the UT concluded there was an obligation on Talksport to provide work it was not necessary for them to consider this HMRC appeal point. HMRC’s stance is that MOO exists where someone has agreed to work in exchange for pay – this viewpoint ignores existing IR35 case law. The UT’s view on this would have been welcomed.

The UT did go on, however, to consider Control, and they highlighted the importance of the right of control. They found that while Mr Hawksbee was given significant freedom over the content and format of the shows, there was “a sufficient framework of control” which gave Talksport control over Mr Hawksbee. Effectively, while Talksport was happy to allow Mr Hawksbee a degree of autonomy, and did not exercise significant control in practice, they did retain an ultimate right of control.

While the UT did consider other “in business” factors, and made mention of the lack of financial risk, and length of engagement, this decision fell on MOO (and to a lesser extent control).

A different, branded defence?

As stated at the outset of this piece, this case was the latest in “presenter” cases heard at tribunal, which are not the ‘norm’ as far as IR35 is concerned. On reading both the FTT and UT decision of KPL, I cannot help but think that had a defence akin to that in the Lorraine Kelly case , that of a “brand”, been forcefully put forward, then this may have held more weight with the UT (although this would not have completely disposed of the inherent issues with the written documents).

While this is a considerable blow to KPL, this judgment does highlight the importance of written documentation. Over the years commentators and so-called ‘IR35 experts’ have encouraged focus on the working arrangements over the contracts. While it is true that a robust contract will prove of little use if it is merely a paper-signing exercise to provide a false representation of the true arrangements, a written contract is the first and foremost best piece of evidence in any IR35 or status enquiry, and will be scrutinised by the courts. It is vital contracts are drafted with care, and take into account all the rights and obligations between the parties in respect of the fundamentals of status – a properly drafted contract can cut the length of an IR35 enquiry significantly and avoid the need for a tribunal hearing in the first place.

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Written by David Harmer

David began his career with Markel Tax at 18 and has since spent 10 years with the business, completing a law degree and working his way through the ranks of tax consultant to director. Defending tax payers against HMRC challenges on all areas of contentious tax law including IR35, self-employed status, CIS, agency legislation etc., his tribunal victories include the well-known Sherburn Aero Club case.
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