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Former professional footballer and Sky Sports pundit Neil McCann loses his IR35 appeal

22nd Apr 2022
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As a highly-respected sub-contractor and intermediary in the contractual chain, The Guild...
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Neil McCann is a former Scottish Premiership footballer who, after retirement, moved into punditry and provided his services to British Sky Broadcasting Ltd (Sky) through his personal service company McCann Media Limited (MML).

HMRC raised tax determinations and National Insurance decisions against MML as it considered the IR35 intermediaries legislation applied to two hypothetical contracts between Mr McCann and Sky covering the tax years 2013-14 to 2017-18. MML appealed against those decisions.

The First Tier Tribunal (“FTT”) first looked to establish the hypothetical contract using the three steps as set out in Revenue & Customs Commissioners v Kickabout Productions Ltd [2020] UKUT 216 (TCC):

  • Step 1: Find the terms of the actual contractual arrangements and relevant circumstances within which the individual worked.
  • Step 2: Ascertain the terms of the hypothetical contract postulated by s49(1)(c)(i) ITEPA 2003 and the counterpart legislation as applicable for the purposes of NICs.
  • Step 3: Consider whether the hypothetical contract would be a contract of employment.

When considering these steps, the FTT also draw upon guidance set out in other key cases such as HMRC v Atholl House Productions Limited [2021] UKUT 37 (TCC). Under step one, the FTT concluded that the contracts between MML and Sky did largely reflect the agreement between the parties. 

In respect of the hypothetical contract, the FTT concluded that several terms would be incorporated, including the following:

  • Where there was an obligation on Sky to pay monthly, Sky would have the right to determine where and when the work was done;
  • Sky would have final editorial control; and
  • Mr McCann was subject to restrictive covenants, including to whom he could provide his services.

When considering whether the hypothetical contract would be a contract of employment, the FTT looked to establish whether the conditions required for a contract of employment as set out in Ready Mixed Concrete were satisfied - these being whether there is a mutuality of obligation, control and if the other provisions of the contract are consistent with it being a contract of service.

The FTT concluded that the first condition was satisfied on the basis that Sky was required to pay Mr McCann monthly based on an agreed annual fee which was payable irrespective of the level of service requested or actually performed. Mr McCann was personally obligated to perform the services (with no opportunity to provide a substitute or delegate) and he was also obligated to provide services as reasonably required by Sky.

When looking at the second condition, the FTT concluded that Sky did have a sufficient degree of control to satisfy this condition.

When looking at the final condition, the FTT considered the provision of equipment, financial risk, opportunity to profit from sound management, economic dependence and right to restrict other activities, and the stated intentions and understanding of the parties.

On assessing all the factors, the FTT concluded that Mr McCann could not be in business on his own account under the terms of the hypothetical contract. The FTT placed particular weight on Mr McCann’s entitlement to an annual fee regardless of the services provided, and the fact that he did not provide services to other broadcasters and could not do so, in light of the restrictive covenant in place.

The FTT dismissed MML’s appeal in favour of HMRC, finding that the provisions of the hypothetical contract were consistent with a contract of employment and that the IR35 intermediaries legislation applied to the contracts between Sky and MML.


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How can The Guild help?

The Guild has in-house ex-HMRC Employer Compliance and CIS experts who can help you with an HMRC enquiry, whether at the outset of the review or at a point where HMRC demands are escalating.


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