In PD & MJ Limited v HMRC [2025] UKUT 00094, the Upper Tribunal (UT) found that Sky Sports presenter, Phil Thompson, was an employee for Income Tax and National Insurance purposes.
In yet another IR35 case, Phil Thompson, presenter on Soccer Saturday, believed his Personal Service Company (PSC), PD & MJ Limited (PDMJL) was operating outside of IR35.
The Upper Tribunal (UT) dismissed Mr Thompson’s appeal, agreeing with the First Tier Tribunal’s (FTT) initial conclusion which deemed Mr Thompson an employee and liable to pay £294,306.68 in PAYE and National Insurance.
The FTT’s decision was based on the 'hypothetical contract' between Sky and PDMJL, which the tribunal believed to be one of employment:
- 80% of Mr Thompson's earnings were provided by Sky.
- Mr Thompson had to seek approval to work elsewhere and Sky had the right to prevent him from working for competitors, giving Sky a sufficient framework of control.
- The public associated Mr Thompson with Soccer Saturday and there was an expectation by the public to see him on that specific show.
- Sky retained control over confidential information and intellectual property arising from the services provided.
- The contract allowed for termination by Sky but not PDMJL.
In reaching their conclusion the FTT considered the three-part provisions outlined in HMRC v Atholl House Productions Limited [2022] EWCA Civ 501:
- What are the actual terms of the contract between the intermediary and the end client?
- What would be the terms of the hypothetical contract, if the individual contracted with the end client directly?
- Would the hypothetical contract be one of employment? This provision was broken down into three further stages as set out in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] (RMC).
- Does mutuality of obligation exist in the hypothetical contract?
- Whether a degree of control exists.
- Other relevant factors, both contractual and non-contractual.
Mr Thompson accepted that there was sufficient mutuality of obligation between parties but did not believe the remaining two tests were met. He appealed against the FTT's decision on the grounds that the tribunal's:
- Interpretation of the actual contract between PDMJL and Sky was wrong in law.
- Identification of the terms of the hypothetical contract was wrong in law.
- Decision on whether the necessary framework of control existed was wrong in law.
- Application of the third stage of the employment test was wrong in law.
There was significant discussion around the first two points with the UT agreeing with the FTT’s interpretation and identification of the hypothetical and actual contracts and finding that no error in law had occurred.
It was argued by PDMJL that the FTT’s decision surrounding the sufficient framework of control might have been different had the FTT not made errors in law concluding grounds one and two.
Since the UT had found no error in law on grounds one and two, no error could be found with the FTT's conclusion on grounds three.
Significant discussions were undertaken regarding ground four of the appeal. Some of the areas discussed in the FTT's conclusion were:
- The control set out by Sky was considerable, particularly Sky’s right to require Mr Thompson's services at their own choice of location. The UT agreed the hypothetical contract provided a significant level of control being consistent with an employment relationship.
- Mr Thompson being allowed to voice his own opinions did not determine the status of his employment. The UT found employees can provide and exercise judgement without the direction of an employer in the same manner as someone with self-employed status.
- Mr Thompson's ability to determine when he prepared for the programme and when he left after the programme had finished was not indicative of being self-employed. The UT stated these factors were not inconsistent with employment.
- A termination of the contract could only be made by Sky. The UT found this was a strong factor consistent with employment because it restricted Mr Thompson from having any right to get out of the contract.
- Mr Thompson had become associated with Soccer Saturday and was expected to be on screen on a Saturday morning. The UT found that although Mr Thompson had a status in the football world, he had ‘nonetheless’ become associated specifically with this programme.
- Sky was the majority of Mr Thompson's work. 80% of the company’s earnings, came from Sky. The UT found that he would have been largely dependable on Sky for earnings, which suggests being reliable on one ‘paymaster’, consistent with being an employee.
The UT upheld all points in the FTT's conclusion.
The appeal was dismissed.
Useful guides on this topic
IR35
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?
Personal Service Company (PSC) tax
What is a PSC? What are the tax implications for a PSC and its owners?
External link
