IR35: An ‘on the offensive’ HMRC thrashes Talksport host Paul Hawksbee
A narrow IR35 court win in 2019 for Talksport host Paul Hawksbee which was overturned in HMRC’s favour has culminated in the taxman triumphing again -- this time unquestionably.
In fact, far from beating HMRC’s assessment he was inside IR35 at the radio station between 2012 and 2015, Mr Hawksbee has now heard that on all three key status factors, he failed.
‘No more than an attempt to re-argue IR35 status’
A clearly irritated judge David Richards therefore found that the 60-year-old broadcaster’s bid to overturn HMRC’s victory was, “no more than an attempt to re-argue” his IR35 status.
As a result, the Court of Appeal judge handed the comedy writer and ‘Hawksbee and Jacobs Show’ co-host a £140,000 tax bill.
“Given the sums involved,” says Qdos' Seb Maley, referring to the HMRC bill of almost £90,000 in income tax and more than £50,000 in NICs, “[this case] is yet another reminder of the importance of IR35 compliance and making a well-informed decision regarding status from the [outset].”
‘Years of distress and enormous costs’
But Mr Hawksbee’s case, which first went to tribunal in September 2018, is also a reminder of the unfairness of protracted IR35 disputes, according to status specialist Kate Cottrell.
“Once again, we have the need for taxpayers to face years of distress and enormous costs,” the co-founder of Bauer & Cottrell began.
“The costs mean that the majority of those faced with IR35 HMRC investigations have to give in -- whether HMRC are right or wrong. Something needs to be done. Justice should be available to all -- not just those with deep pockets.”
‘Keep good evidence’
Chartered accountant Helen Christopher agrees: “What is clear from…[the Court of Appeal’s judgment against Kickabout Productions] is that assessing IR35 is complex, time-consuming and expensive.”
Chief operating officer at Orange Genie, Ms Christopher advised: “Contractors and end-clients alike should be reminded of the need to keep good evidence to counter argue any suggestion that theirs is an employment relationship.”
Good record-keeping appears all the more important with long client engagements, where IR35 status is potentially more likely to fluctuate.
‘Status can easily change’
Ahead of an exclusive analysis of the case for ContractorUK, IR35 contract reviewer Mr Maley said: “Hawksbee was engaged by Talksport for 18 years and IR35 status can easily change over time.
“[So] regular IR35 contract and working practice reviews are vital. IR35 insurance remains key for contractors and businesses [too so they can] cover the costs of IR35 defence, advice and potential liabilities.”
In his analysis for ContractorUK, Mr Maley will say that HMRC’s win over Kickabout Productions might not have immediate implications for contractors in other sectors, such as technology.
Nonetheless, two wins in a row for HMRC over the broadcaster – on top of Sky pundit Neil McCann losing his IR35 case, does imply the tax authority is “on the offensive,” he warned.
Rebecca Seeley Harris, a tax lawyer agrees there is significance.
“These are very important judgments for IR35 and employment status generally,” said Ms Seeley Harris, albeit referring to the Hawksbee ruling -- and a parallel, new ruling granting HMRC to appeal the current IR35 win of fellow radio presenter Kaye Adams.
‘Fact not fiction for contract and working practices’
Chris Mattingly of tax dispute firm WTT Consulting told ContractorUK: “The fact that both these cases reached the Court of Appeal highlights just how complex IR35 legislation is.
“Contractors and engagers should therefore be reminded that the contract and working practices need to be based on fact, not fiction.
“Implemented correctly, there is no reason why a contractor cannot operate confidently outside IR35. As we have seen with these decisions, the financial and emotional cost of getting it wrong will be significant.”