In Little Piece of Paradise Limited v HMRC [2021] TC08300, the First Tier Tribunal (FTT) found that Sky Sports presenter Dave Clark was a deemed employee for the purposes of IR35 and his SKY TV contract with a subsequent PAYE and Class 1 NICs liability of over £280,000.

  • Mr Clark was a boxing and darts presenter working for British Satellite Broadcasting (later to become Sky TV) from 1988 as a self-employed individual.
  • In 2003, Sky requested that Mr Clark provide his services through a Personal Service Company (PSC).
  • Three services agreements were applied between 2013 to 2018. Each agreement was split into Key Terms, Terms & Conditions and a Non-Disclosure Agreement (NDA) between Sky and Mr Clark.
  • HMRC revied the case and decided to apply the Intermediaries legislation (IR35) to Mr Clark's earnings paid into his company, Little Piece of Paradise Limited to pay Income Tax and Class 1 NIC 0f £281,084 for the five-year period from 2013 to 2018. The company appealed.

As required by the legislation, the FTT constructed the terms of a hypothetical contract between Mr Clark and Sky TV that would have been in place in the absence of his intermediary company. It concluded that the following terms were a question of fact and gathered from a mix of the existing contract and the parties' own conduct:

  • Mr Clark was personally contracted to perform the services and Sky had first call on his services.
  • Mr Clark was engaged to work 64 days. Sky dictated which 64 days were worked, although the Darts calendar dictated when and where.
  • There was a set annual fee for those 64 days, invoiced monthly regardless of whether any days were worked in that month.
  • Sky had the right to terminate the contract with immediate effect if any of the stipulated conditions were met.
  • Mr Clark was subject to a number of restrictions: non-disclosure, non-solicitation and non-compete.
  • Sky had editorial control over the programme, although Mr Clark carried out his own preparatory work and has some control over his service delivery.
  • Sky provided all the equipment, organised travel and accommodation and paid reasonable expenses.
  • Mr Clark assigned over exclusive rights arising from his service output to Sky.
  • The annual fee included a sum for holiday entitlement.

Using the hypothetical contract, the FTT applied the test set out in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 to check Employment status.

  • Mutuality of obligation: Sky had first call on Mr Clark's personal services and for that paid 12 monthly instalments of an annual fixed fee. There was mutuality of obligation.
  • Control to a sufficient degree: Control of the 'What', 'When' and 'Where' elements of the contract rested with Sky. Mr Clark had a high degree of control of 'How' but his expertise was what Sky was paying for and ultimately 'What' is more important than 'How'. The extensive warranties, non-solicitation/compete clauses and the NDA indicated a high level of control by Sky. Sky had control.
  • Other relevant factors: These factors may negate any conclusion as to a contract of service as indicated by the first two conditions.
    • In reality, given the travel, pre-event preparatory work and the extensive restrictions on Mr Clark's ability to undertake other business activities, Mr Clark was not free to work elsewhere outside of the 64 days.
    • To understand whether Mr Clark could be said to be in business on his own account, the FTT used the test from Hall (HMIT) v Lorimer [1994] 1 WLR 209, which was whether Mr Clark was dependent on Sky as the paymaster for the financial exploitation of his talents. The FTT found this was the case.
    • Although argued to the contrary by Mr Clark, the FTT found that there was no right of substitution. The person that had been used when necessary was an existing Sky Sports presenter who was paid directly by Sky and not by Mr Clark. Separately, the contract was not for the services of a sports presenter in general, but specifically for the services of Mr Clark.

The FTT concluded that the contract was for one of service and so caught by the IR35 legislation. The appeal was dismissed.

Useful guides on this topic

IR35: Off-Payroll Working
What is IR35? How does it work? How is the deemed payment calculated? What expenses are deductible?

Employment status & detailed checklist
Why is it important to check my employment status? What tests should I use? What is the recent case law?

Employment Status: mutuality of obligation
What is mutuality of obligation? Why is mutuality of obligation not considered by HMRC's Check Employment Status for Tax tool?

IR35: Kay Adams v Lorraine Kelly v Christa Ackroyd v Eamonn Holmes
What was the difference between the facts and circumstances of the recent IR35 decisions on radio and TV hosts, Kay Adams, Lorraine Kelly, Christa Ackroyd and Eamonn Holmes?

External link

Little Piece of Paradise Limited v HMRC [2021] TC08300


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