Bryan Robson just lost his IR35 case (sort of). Here’s how
The latest released First-Tier Tribunal judgment with potential implications for limited company contractors scores another IR35 victory for HMRC, writes David Harmer, associate director at Markel Tax, a consultancy specialising in contractor taxation.
Sorry, but ‘inside IR35’ isn’t a 'win'
In the most recent case involving a high-profile personality, the FTT found that the arrangements between former Manchester United Football Club (MUFC) captain -- and ex-England football captain -- Bryan Robson, amounted to a contract of employment.
Despite some attention-grabbing headlines to the contrary, Bryan Robson did not “win” the majority of his IR35 case. Rather, the majority of the years assessed by HMRC were outside of the remit of IR35 itself, and therefore the legislation simply could not apply.
Robson V HMRC - the background
The facts of the case are detailed considerably in the judgment -- Bryan Robson Limited V The Commissioners for HMRC. But I summarise them here for brevity:
Bryan Robson entered into a series of contracts with MUFC whereby he agreed to attend a number of events and make appearances for MUFC, entitled “Personal Ambassador Agreements.”
Following an enquiry, HMRC concluded that these engagements were caught by IR35 and raised Tax and National Insurance determinations for tax years ending April 2016 -- April 2021.
It is an important part of this IR35 case that despite Robson having had a limited company in existence since 1981, the Personal Ambassador Agreements were entered into between Robson personally and MUFC until December 2019, at which point his limited company became party to the contract.
HMRC’s concession
Due to this fact, HMRC conceded in its submissions that the appeals against periods prior to December 2019 should be allowed – because, put simply, the limited company was never a party to those arrangements. Without the limited company, there was no “intermediary” to be in scope of the “Intermediaries legislation”.
The case proceeded therefore in respect of the periods post-December 2019 only, leaving just a couple of tax years in dispute -- the April 2020 tax year (albeit only from December 2019), and the April 2021 tax year.
Image rights
An additional factor of this case was that part of the agreement allowed MUFC certain image rights of Robson.
There was much discussion by the tribunal as to whether monies earned from the use of these image rights were capable of forming part of the monies assessable for IR35, and while perhaps an interesting legal point for some scholars, for the purposes of this article, it is sufficient to simply say that the tribunal determined that those monies were in scope as assessable.
The hypothetical contract
The FTT determined that while the contractual arrangements were to be taken into account they did not form the totality of the contractual arrangements between the parties and determined that when taking all factors into account, the “contractual matrix” established the following main characteristics:
- Robson was personally obliged to carry out the work himself.
- Robson did not accept every offer of appearing, he could and did decline events, although there was a minimum commitment of undertakings that both parties agreed and accepted must be provided.
- Robson had autonomy over how he conducted himself at any appearances.
- The “what, when, where” was directed by MUFC, and the event itself would dictate the timings/schedule.
- The arrangements did not include any provisions obliging Robson to follow training, guidelines or policies.
- The intention of the parties was that the arrangements should not create a relationship of employment.
- Robson was to wear club apparel on most of his appearances.
- Robson did not receive any employee benefits.
Why the FTT ruled Robson inside IR35 is (largely) four-fold
Placing much emphasis on the Atholl House judgment (the ‘Kaye Adams IR35 case’) and “painting a picture,” FTT judge Tony Beare found that IR35 did apply to the engagement in the disputed period (which was, in effect, a total of just under 16 months).
This ‘inside IR35’ conclusion for Bryan Robson was reached on the basis that:
- Robson was obliged to provide the services personally throughout the engagements.
- There was a minimum number of appearances both parties accepted must be completed; while Robson did decline a number of events he accepted the minimum amount of appearances must be fulfilled.
- While Robson had autonomy over how he conducted himself at events, there was a sufficient framework of control over the appearances such that MUFC controlled the what, when and where of each appearance, and how the event would progress.
- MUFC retained a right to impose sanctions and control over Robson.
Robson V HMRC: the IR35 result
So the result of this IR35 case is that Robson was found to be an employee.
While, as mentioned above, he was not held liable under IR35 to pay for a number of the earlier years, this was simply due to the fact HMRC determined the wrong party as the “employer” for those years (the engaging entity of the deemed employee was MUFC, not Robson’s limited company).
What can limited company contractors learn from the Bryan Robson IR35 case?
The five key takeaways for contractors from Bryan Robson Ltd V HMRC; and specifically, the couple of tax years that the former midfielder let get past him, are:
1. HMRC should have noticed, and realised, well before the hearing that the earlier year engagements were not capable of being within the remit of IR35. Contractors must take care to scrutinise all determinations issued by HMRC for any errors, and ensure they raise issues immediately as part of their appeals.
2. The contract did not address the fundamentals of IR35. We hear, constantly, the “contract is king.” However, the contract in the Robson case failed to address the key areas of IR35 sufficiently. So, contracts must be carefully reviewed and updated -- particularly where there are lengthy engagements.
3. Where one of the fundamentals of IR35 (i.e. the classic IR35 status tests) is weaker, ensure your contract overstates at least one of the other fundamental areas.
In the Robson case, Personal Service was a given (there was no possibility of substitution), and Mutuality Of Obligation was equally weak given the minimum commitments.
Significantly, Control simply was not addressed in the contract. In our view, Control should have been earmarked throughout the contract to demonstrate a lack of control. And more than just that – specifically, a lack of any right of control should be demonstrated, to give strength to any future arguments.
4. Re-establish independent parameters year-on-year.
While contracts in this case were renewed, it is clear that over time the relationship that was created between Robson and MUFC was less “independent” and more one of reliance. So, re-establish independent contracting arrangements at least every year, and re-confirm parameters. Doing both can help to ensure the relationship remains one of genuine self-employed contracting.
5. Stick with it!
This case ran for a number of years and ultimately Robson saw some element of victory, given that earlier years were disregarded. Enquiry lengths and the tribunal process often seem far too long for comfort, but strength of resolve can pay off in the end.
How much will Robson now pay HMRC for being inside IR35?
Interestingly, the judgment in the Revenue’s favour does not give a record of the liability amounts. However, it does confirm the income earnings for Robson.
For December 3rd 2019 to April 5th 2020, earnings of £171,500 are stipulated. And for the tax year ending 2021, Robson’s earnings were £319,000.
Under an extremely rough calculation, using 35% in tax and NI owed to HMRC, the taxman would be due approximately £171,000. While this is an entirely speculative figure (indeed, no take-home for the taxman was ordered by Judge Beare, and it was left for both parties to agree on the financials after the ruling), it goes some way to showing that the Revenue might agree that there was some element of victory for the taxpayer, particularly when set against how much it wanted out of him in the first place.