In Red, White and Green Limited v HMRC [2020] TC7603, the First Tier Tribunal (FTT) held that income received by Eamonn Holmes’ Personal Service Company was within IR35. If he had provided services directly to ITV it would have been a contract of employment.
The employment intermediary rules, known as IR35 impose employment taxes on a Personal Service Company (PSC):
- Where the arrangements between the worker and the end client are such that, if engaged directly, the worker would have been an employee.
- The PSC must treat the amounts received as employment income of the individual and operate PAYE.
Eamonn Holmes (EH) was contracted by ITV to present the Good Morning show through his PSC, Red, White and Green Limited (RWG).
- The key terms of the ITV contracts were:
- EH could not undertake work which would conflict with his ITV work.
- Dates and place of work were fixed but ITV could change these at their discretion.
- A fixed fee was to be paid for each show performed.
- ITV provided a car for EH to travel to and from the studio, clothing for his TV appearances, reimbursement of some travel expenses and insurance cover. He was not to wear branded products or otherwise promote products during the show.
- ITV had full discretion and control over editorial content. It decided who EH would interview, undertaking research for interviews. He did not attend production meetings.
- If RWG could not fulfil the contract, it would be for ITV to get a replacement and there would be no payment to RWG. He could not send a substitute.
- Between 2011 and 2015 EH also worked as a presenter on Sky News’ 'Sunrise' morning show. He said this occupied more of his time than This Morning. This contract was directly with EH and not through his company, RWG.
- EH regarded himself as a 'one-man band' answerable to no one but himself, saying “Once I am on air I am effectively in total control of what needs to happen”.
HMRC disagreed and issued determinations and notices for Income Tax and NICs under PAYE for the periods 2011/12 to 2014/15 on the basis that IR35 applied. RWG appealed.
The FTT agreed with HMRC, finding that overall the relationship between ITV and EH was one of employment, not self-employment:
- There was Mutuality of Obligation. ITV was required to provide work on specified contractual dates on payment of a fixed fee. EH was required to work on those dates for that fee.
- ITV had overall control over what was to be done and, in a broad sense, how. This was sufficient to put the relationship into the employment field.
The judge acknowledged that it is difficult for ITV to control a presenter during a live television broadcast meaning EH had a high level of autonomy but said this did not mean that the control test could not be met overall. Added to this, there were no strong self-employment indicators even though EH did have self-employed relationships with other clients.
Comment
This is a lengthy decision which for some reason took nearly two years to be released. It is possible that Mr Holmes may decide to appeal the decision.
Links to our guides
Personal Service Company (PSC) tax
HM Revenue & Customs (HMRC) define a service company as a company that generates the majority of its income from supplying services rather than goods to clients.
IR35: Off-payroll working (subscriber)
The IR35 tax rules apply when a worker supplies his personal services through an intermediary trading vehicle such as a company or partnership to an end client.
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