Taxman tries to tackle ex-rugby union ace Stuart Barnes on IR35, but fails

HMRC tried to tackle another rugby ace who hung up his boots to commentate on Sky Sports, Stuart Barnes, hot on the heels of it deeming Michael Lynagh IR35-caught.

But it was the IR35 case of a third Sky Sports broadcaster Dave Clark, which HMRC used for its offensive -- and wrongly, given that Barnes has won, thereby dodging a £695,000 tax bill.

Ex-inspector Kate Cottrell issued this assessment of HMRC mis-stepping, despite the ruling noting Barnes and Clark had “practically identical” contracts, exclusively to ContractorUK.

'HMRC believed the Barnes case would be a walk in the park'

“[Clark’s PSC] Little Piece of Paradise -- defeated on IR35 by HMRC -- was almost followed to the letter by HMRC…in Barnes’ case,” Cottrell, an IR35 expert says in her analysis today.

“The same judge; the same contract, the same claims by HMRC. And it even set out the same hypothetical contract. HMRC must have thought the hearing would be a walk in the park.”

But not keen on anyone doing the FTT’s job but the FTT, judge Heidi Poon said constructing a hypothetical contract “remains an indispensable task for the tribunal”, not HMRC.

'Mapping with employees isn't sound or relevant'

The judge didn’t sound very keen on the Revenue’s other big tactic in the case -- S&L Barnes Ltd v HMRC, which was before the First-Tier Tribunal (FTT) in July 2022.

More heavily laboured than even the comparisons to Clark, the taxman tried to discredit Barnes’ claims by drawing parallels between him and Miles Harrison, a Sky employee.

HMRC even got Sky to fill in a questionnaire on the working practices of the two (who broadcast together), clearly hoping its answers would frame Barnes as a disguised employee.

Not a fan of this play by HMRC, judge Poon said trying to determine Barnes’ contractual relationship with Sky by “mapping” it onto Harrison’s was not “sound or relevant”.

'Each case turns on its own facts, HMRC'

Moreover, pitting employee against contractor actually backfired for HMRC, and not just because it not realising “each case turns on its own facts” irked judge Poon, as she put it.

In particular, the judge said Barnes’ role -- unlike employee Harrison’s role -- required “analytical input,” and without it, the live commentary for the audience would be “duller.”

In her analysis today, Cottrell, the co-founder of status specialists Bauer & Cottrell indicates it is a distinction that commentators who come under IR35 scrutiny will welcome.

'Unique attraction'

Agreeing to the significance of the distinction at a time when Eamonn Holmes and other presenters are fighting HMRC over IR35, is ReLegal Consulting’s Rebecca Seeley Harris.

“Judge Poon differentiated between a presenter and a commentator,” she reflected.

“A commentator has to draw on their experience -- in Stuart's case playing rugby union -- to provide an interesting analysis of the game. This is the[ir] unique attraction.”

Crucially for Barnes, Sky was far from the only channel seeing the attraction, part explaining his “several clients” during his 2013-2019 HMRC-probed contracts with Sky, and afterwards.

'One part of Barnes' brand'

“The judge sided with Barnes…due to [him] being in-business-on-his-own-account,” says IR35 contract review firm Qdos Contractor.

“The case notes,” said the firm’s Seb Maley “[describe in-business as] the most compelling indicator…[referring to Barnes’] contract with Sky as just ‘one part of the [Barnes] brand.’

“And it contributed on average 60% of the appellant’s income, while over £150,000 on average was also earned from other clients.”

A specialist in contractor compliance Crawford Temple confirmed yesterday that Barnes’ ‘in-business’ credentials were instrumental in the case going his way.

'S&L Barnes Ltd v HMRC should never have got to court'

“Clearly Stuart Barnes was in business on his own account as he had [a significant roster of] other clients,” Mr Temple, CEO at Professional Passport told ContractorUK.

“This is one more example of a case that should never have got to court in the first place.”

However outside IR35 advisory 34Square isn’t so sure that contractors ought to bank on more than one client equating to being a bonafide business.

'In-business ought not to be relied upon'

“Some may conclude that [thanks to the Barnes verdict] we all of a sudden have a precedent that if someone is materially working for more than one client, they must be ‘in business on their own account’ and therefore outside IR35,” says the advisory’s Adam Topham.

In a statement to ContractorUK, he continued: “I’d suggest it shouldn’t be a factor that is wholly relied upon. And indeed it was not the sole driver in the judge’s finding.”

As to how, then, he explains Barnes winning on IR35, Topham spoke of “the inability of HMRC to persuasively demonstrate any characteristics in common with employment.”

'Sufficient framework of control'

Yet the FTT did find a “sufficient framework” of control over Barnes in the performance of his services to Sky, observes Kingsbridge’s IR35 project manager Ryan Dawson.

The broadcaster controlled the ‘what’ for example (“live commentary of match events”); it had “first call” on his services, and it controlled both the location and date of services.

Further signalling an employment relationship, Barnes was obligated to perform the services to Sky personally, the Kingsbridge IR35 project manager pointed out.

'Contrary to HMRC's current methods'

But Control and Personal Service going against him only goes to show the stock which was put in Barnes, who retained his IP, being an expert, a brand, like Kaye Adams, says Cottrell.

“Barnes and, going through the courts right now Eamonn Holmes, have the benefit of case law precedent in the form of the 'Atholl' case at the Court of Appeal. This essentially sets out the correct way to address these cases -- a way that’s contrary to HMRC’s current methods. 

Cottrell continued in a statement to ContractorUK: “We will have to see how things pan out but it seems that if Mr Holmes can claim the same as Mr Barnes – that’s he is an expert (“the voice of rugby”) or to quote judge Poon, that Barnes was the ‘master and creator of his own opinions as a pundit’ [reflecting the fact that he retained his intellectual  property]…plus was in-business, then a win for Mr Holmes might also be on the cards.”

'Unusual for an employer to interview its employee'

Tellingly, even a big brand like Sky had to ask Barnes if his one-person brand would share its unique offering -- derived from his expertise on rugby union and experience of playing the sport professionally -- when they wanted input on non-featured fixtures.

“Depending on his availability, Mr Barnes would agree to be interviewed for Sky Sports News during pre-match on request, especially for matches not broadcast by Sky such as the Six Nations and the World Cup,” states p37 of the ruling, published on January 12th 2023.

“The news interviewer of Mr Barnes might have been an employee for Sky, but it would be most unusual for an employer to interview its employee regularly on request (if Mr Barnes were Sky’s employee).”

Judge Poon summed up: “The fact that Sky Sports News sought to interview Mr Barnes is a strong indicator that the contractual relationship in real terms was not that of a master-servant relationship in a contract of employment.”

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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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