In Kickabout Productions Limited v HMRC [2019] TC7230 the First Tier Tribunal (FTT) narrowly decided that for the purposes of the hypothetical employment contract requirement of IR35, that radio broadcaster Paul Hawksbee would not have been an employee of TalkSPORT. This decision was overturned by the Upper Tribunal in July 2020.
- Kickabout Productions Limited (KPL) provided the services of Paul Hawksbee as a radio broadcaster to TalkSPORT.
- HMRC raised assessments for a three year period of £143k in PAYE and NICs on the basis that the company was within the IR35 Off-payrolling rules.
- The company would have been eligible for corporation tax relief on the deemed salary calculated if IR35 applied and this was not part of the appeal.
Evidence was provided by Liam Fisher, who had been Talksport's National Controller for Speech Radio. The FTT gained the impression that his evidence as to the lack of control exercised by Talksport over Mr Hawksbee was somewhat rehearsed and signalled a reluctance to deviate from an agreed position.
Mr Hawksbee also gave evidence, the FTT noted, an honest and reliable witness, with the one reservation that his responses to questions regarding control over his services by Talksport in the event that he and Talksport did not agree were somewhat evasive.
The FTT considered two contracts and the working relationships of the parties.
- Deciding that determination of IR35 in the case of a professional supplying their services “is not a mechanical exercise of running through items on a check list", the FTT firstly ran through its conclusions according to the conventional checklist provided by case law as follows:
- Mutuality of obligation exists, including under Hypothetical Contract Two notwithstanding the provision stipulating “no obligation to assign”, but it is not strongly indicative of employment because of the absence of obligation on Talksport to provide work.
- In relation to control, certain facets of control are not indicative as they apply to employees and non-employees alike. Talksport controls where and when services are performed. In relation to how services are performed, Talksport lacks effective control over a live broadcast, but that is not significant as an indicator. Mr Hawksbee has a very high degree of control over the format and content of The Show, but the ultimate right of control in this respect, which the authorities indicate is more important, lies with Talksport, by necessary implication under Hypothetical Contract Two. Talksport’s control over what services are performed is limited, because the substantive obligations relate only to delivery of The Show.
- The rights of exclusivity and call, which vary under each hypothetical contract, are indicators of employment, but the weight to be afforded to that is reduced by various factors (set out at [202]).
- The duration of the contracts, termination provisions and obligation to discuss renewal are broadly neutral.
- The absence of any right of substitution points towards employment, but in the circumstances not significantly.
- The absence of economically equivalent rights relating to holiday, sick pay, pensions or paternity leave points away from employment.
- The absence of any rights relating to medicals, training, appraisals, grievance procedures or disciplinary procedures points away from employment.
- The payment obligations point away from employment.
- In context, Mr Hawksbee does bear financial risk, which is more consistent with a contract for services.
- Taken together, the other Market Investigations criteria are broadly neutral.
- The intention of the parties was to create a contract for services and not an employment relationship. This carries weight only if the employment status is otherwise unclear.
- Mr Hawksbee was not “part and parcel” of the Talksport organisation.
- The degree of economic dependency, and, with caveats, the aggregate length of time over which successive contracts were renewed, were material indicators of employment.
The FTT then pondered the question of mutuality of obligation and control and concluded that there was:
- No obligation on Talksport to provide work.
- Controlled services largely restricted to delivering The Show.
- No equivalent rights to holiday, sick pay, pensions or paternity leave.
- No provisions regarding medicals, training etc.
- A payment obligation restricted to a fee for each show delivered, with no retainer or bonus.
- An individual who, while clearly synonymous with The Show, is not part and parcel of the Talksport organisation.
Looking at the picture as a whole, the FTT concluded that the relationship in this case was not one of employment but rather was a contract for services.
The decision was by casting vote of the Judge, the lay member of the tribunal decided that Talksport was obliged to offer work and Mr Hawksbee to do that work, and that he would have been an employee.
Comment
HMRC were successful in appealing this decision - there is reasonable sum of tax at stake. The case shows how difficult it can be to determine employment status and much was made on the mutuality of obligation factor, something that is absent from the current version of HMRC's CEST tool.
A side issue is whether the judge was correct to say that working out employment status is not a mechanical exercise? It rather depends on the checklist used...
Our practical tax guides on this topic
Off-payroll working: At a glance
The new rules for IR35 and personal service companies from April 2020
Employment intermediaries legislation (now called Offpayroll working), 'IR35'
Personal service companies & tax
External links
Kickabout Productions Limited v HMRC [2019] TC7230
