Where foul play crept into HMRC’s IR35 attack on ex-rugby union star Stuart Barnes

Congratulations to former rugby union star turned Sky Sports commentator Stuart Barnes, the managing director of S&L Barnes Ltd, and commiserations once again to Dave Clark, whose Sky Sports-related case involving his Little Piece of Paradise Ltd – defeated on IR35 by HMRC -- was almost followed to the letter by HMRC in the Barnes case, writes Kate Cottrell of IR35 advisory Bauer & Cottrell.

A straight tackle

Compared to LPPL v HMRC in October of 2020, in S&L Barnes Ltd v HMRC we had the same judge, the same contract, the same claims from HMRC. And it even set out the same hypothetical contract. HMRC must have thought the hearing would be a walk in the park!

However, FTT judge Heidi Poon (at point 94 of her judgment) quickly set the Revenue straight, saying building the terms of the hypothetical contract was the job of the tribunal, not them. 

Comparing roles

At Mr Barnes’ hearing, HMRC made much of comparing the roles of Barnes to his co-presenter Miles Harrison, who was employed by Sky.

The Revenue issued a questionnaire to Sky at the outset of the case directly comparing the two broadcast professionals. 

Judge Poon made clear (at point 128) that each case turns on its own facts. Extremely basic stuff, you might say, and something every IR35 adviser knows and everyone affected by IR35 should know -- but perhaps not something HMRC was actively showing it knew, given that it had to be pointed out to the Revenue.

The judge also said this comparison approach by HMRC is irrelevant and unsound.

In particular, the Revenue got told: “Nor do I find it at all a sound or relevant basis to found Mr Barnes’ contractual relationship with Sky by mapping onto how Mr Harrison had been contracted by Sky; each case turns on its own facts.” 

More flaws

Another fundamental flaw in HMRC’s approach is not establishing the differences between a “commentator” and a “presenter”. 

Before this case, HMRC was no doubt buoyed by their success with past “presenter” cases. But their questionnaire sent for Sky to answer simply assumed that Mr Barnes and Mr Harrison were co-presenters.

However, there were major differences between the two, with Mr Harrison being determined as being responsible for the ‘who’ and the ‘what’ content, and Mr Barnes being responsible for the ‘how’ and ‘why’ content. The latter two were clearly conveyed as things that a presenter would typically be unable to do.  

Related, Judge Poon found the roles to be “qualitatively different”. Moreover, “without Mr Barnes’ analytical input, the live commentary of a match with only the first voice [that of Mr Harrison] would be all the duller, and unlikely to attract as many viewers as a live match with punditry input.”

Any competent IR35 adviser would always take care where there are employees apparently undertaking the same service(s) as contractors. But more often than not, differences are easily established and can prove sufficient to show that IR35 does not apply.

Final thought

The message from the Barnes case for limited company contractors, and everyone else involved in status decisions is to always drill-down into the reality of the working practices, as well as the contract.  

Refreshingly, the Barnes case sets out how that process should work and it takes into account up-to-date case law precedent, such as Atholl House Productions and LPPL. The case itself does not create precedent as it is a FTT case, but there are lessons here for contractors and -- if it wants to up its game, for HMRC too.

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Written by Kate Cottrell

Kate Cottrell from Bauer & Cottrell Limited - leading UK IR35 expert who has been contributing IR35 guidance, commentary and articles to ContractorUK for many years.
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