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IR35: Big loss for Eamonn Holmes

Eamonn Holmes is the tenth broadcaster to face a grilling under the IR35 rules, as chronicled in our IR35 casebook, and the fourth of those individuals to lose at the first tier tribunal (FTT).  

25th Feb 2020
Tax Writer Taxwriter Ltd
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Eamonn Holmes
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The case was heard in June 2018, but it has taken 20 months for the case report to be published. Why there has been such a long delay is quite a mystery. However, it does appear that all reference to the amount of income tax and NIC at stake has been stripped out of the case report, as has any mention of the level of fees paid for Holmes’ services.

Facts

The case concerned the application of IR35 to contracts between Holmes’ own personal service company 'Red, White and Green Ltd (RWG)' and ITV between 2011/12 to 2014/15.

Holmes has worked through RWG since April 2001, but during the years in question, he also used a different PSC: Holmes and Away Ltd.

Evidence

The bulk of the evidence was taken from the wording of the contracts between RWG and ITV (there was no other intermediary), and notes of a meeting between ITV representatives and HMRC in 2015.

Variety of work

Holmes has been presenting ITV’s daytime programme This Morning since at least 2006. He also worked on other TV programmes during the period 2011 to 2015, including as a presenter of Sky News’ Sunrise morning show, which was also contracted through RWG. He had significant other income in the period from radio and print media assignments, most of which was accounted for as self-employed income rather than as income of RWG.

Control

In his evidence, Holmes boasted about how he ‘controlled’ the This Morning show, and the FTT accepted that he had considerable autonomy over the way in which he presented on the live show. He was not required to attend production meetings or rehearsals.

However, Holmes accepted that ITV had the ultimate right of editorial control. The TV company decided who Holmes would interview on the show, ITV staff researched each interview and gave Holmes a brief, but he would sometimes do supplementary research.

Holmes had to abide by the OFCOM guidelines and not wear any branded clothing while presenting the show.

He was also subject to a number of restrictions in respect of his other activities. For example, he was not permitted to take on work from a third party which might conflict with rendering his services to ITV.  There were also restrictions on his leisure activities and provisions relating to the state of his health.

Substitution

Holmes accepted that ITV wanted his services. He was not permitted to provide a replacement. If he was ill it was for ITV to find someone else and RWG did not get paid for that other person’s services.  The notes from the ITV and HMRC meeting confirmed that substitution was not permitted.

Expenses

The TV company provided a car to take him from his home to the studio every day he was working on the show. If he had to do an outside broadcast the TV company would pay for hotel accommodation and a car, booked directly and paid for by ITV.

Mutuality of obligation

Under each contract between ITV and GRW, Holmes was required to work a minimum number of shows and would receive payment in full if a show was cancelled and could not be rescheduled. This was clear evidence that a mutuality of obligation was in place for both parties. Holmes was obliged to provide his services to ITV and the TV company was obliged to pay for his services in full, even if the show was cancelled.

Holmes’ representative argued that the other tests did not demonstrate an employee relationship, particularly as Holmes carried on many other journalistic activities in his own name as a sole-trader.

Conclusion

The FFT judge said the mutuality of obligation and the control issues together placed Holmes in the employment field rather than self-employment in his relationship with ITV. There were no strong self-employment indicators in the relationship between Holmes and ITV, although it was clear that he had a self-employed relationship with his other customers.

The FTT concluded that IR35 did apply to all the contracts between ITV and RGW in the tax years under investigation.

Comment

Commenting on the Eamonn Holmes case, Dave Chaplin, CEO of ContractorCalculator, said: “Had Holmes been investigated under the new off-payroll working rules, due to take effect in April 2020, he would not owe HMRC any money at all.

“It would be his deemed employer, in this case the broadcaster, that would be picking up a tax bill. But in this instance, because of the unfairness of the old IR35 rules, Holmes is now facing a tax bill for employment taxes that shouldn’t even be his responsibility. How is that fair?”

Replies (17)

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Hallerud at Easter
By DJKL
26th Feb 2020 09:47

Rebecca, thanks for the summary.

Just to mention you have a few typos, in particular under CONTROL you have "ware" not wear and "form" not from. Under MOO section there is a sentence that needs corrected, "This was clear evidence of that mutual obligation test was passed"

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Replying to DJKL:
By Rebecca Cave
26th Feb 2020 11:17

I've corrected those points. I was rushing to get this article out, sorry!

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Replying to Rebecca Cave:
Hallerud at Easter
By DJKL
26th Feb 2020 11:29

Don't apologise, you are the one putting in the effort, I am a mere parasite consuming and not even paying.

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By tonyaustin
26th Feb 2020 10:19

Under Comment, I would say it was fair compared to the new rules. Eamonn Holmes was paid gross so has received the money that is being taxed and has indeed paid tax on it to some extent as company profits and dividends, for which he will receive credit. I am sure that if ITV had known it would be liable for the secondary Class 1 NIC instead of EH, it would have reduced the amount it paid him accordingly.

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By Justin Bryant
26th Feb 2020 17:29

The bigger mystery is why is there no link to the actual judgment? Here it is, courtesy of "linkman":

https://www.devereuxchambers.co.uk/assets/docs/publications/RWG_v_HMRC_-...

https://www.devereuxchambers.co.uk/resources/news/view/ir35-applies-to-e...

Looks like a correct decision to me. The quasi sham point is summarised at para 230 and control at para 247 et seq.

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Replying to Justin Bryant:
By Rebecca Cave
26th Feb 2020 15:07

Thanks for finding the case report. I have added in the link.

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By youngloch
27th Feb 2020 11:08

I am constantly surprised why PSC's don't insist on paying their own expenses and just roll it in as part of the fee. Clearly HMRC recognise it as a factor as it is in the updated CEST tool and, based on test results I have seen, clearly can be a swaying factor. Had he paid his own transport costs to outside broadcasts, hotel/subsistence etc then, whilst it might have been a small point, it would have been a clear difference between how an employee would act. Submitting expense claims over and above a fee is, in my opinion, a bad idea for any PSC. If you want to be taxed like a business make sure you act like a business.

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By kestrepo
27th Feb 2020 14:52

In time the raft of Celebrity IR35 cases will cease as the penalties are now firmly fixed at the fee payers level. In my view many of these presenters have been skirting the grey line of self employment for many years and have just now fallen over the edge into higher taxation brackets. While I empathise with many of the self employed in trades that will now be paid via PAYE it is hard for me to shed a tear for this vastly overpaid sector. I have never understood why in a supply and demand economy, where a large number of people would really like to be on TV (not me mind!) the payments to Celebrities are so huge. Adverts and Marketing I get but TV Presenting I don't!

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By IANTO
28th Feb 2020 10:13

I'm intrigued as to why none of those broadcasters so judged have ever taken their case to the ET. It is quite clear from this "The FFT judge said the mutuality of obligation and the control issues together placed Holmes in the employment field rather than self-employment in his relationship with ITV" that an ET would have great difficulty in coming to a different conclusion." Thus the "disguised employer" would have to foot the tax bill and not Holmes.

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By [email protected]
28th Feb 2020 10:35

I wonder if it is Eamonn's accountants advice got him into trouble?

A little forensic reading of the information filed at Companies House suggests he has recently changed his accountants.

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By johnjenkins
28th Feb 2020 10:56

As Boris has got rid of the shackles of the EU, perhaps he should turn to getting rid of the shackles that HMRC are placing around our wealth creators. Or we will end up with a stagnant economy caused not by any virus or Brexit, but by our own antiquated tax laws and HMRC's approach to employment status.

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Replying to johnjenkins:
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By 0705736
28th Feb 2020 12:39

I wouldn't describe Holmes as a wealth creator. Except for himself of course - I'm sure he's created a fair amount of wealth for himself. I think we should have a little more fairness in taxation, applying the rules equally to all, rather than continuing to let highly paid celebrities and others drive a coach and horses through the rules that apply to ordinary people. The tribunal found that he was essentially in the position of an employee (although disguised as something else) and therefore he should pay tax as an employee.

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Replying to 0705736:
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By johnjenkins
28th Feb 2020 12:58

Therein lies the problem. There is no such thing as "disguised employment". There is no definition of self-employed in Law. To actually take away Limited Company status and replace it with IR35 or any other such crap is against the will of the working majority and we all know what happens when you go against the will of the people. HMRC should not be allowed to get involved in the commercial decision of work giver and work doer. We can see what is happening from that involvement and it will eventually lead to economic stagnation. I'm sure Holmes has created wealth for ITV by being popular, therefore advertisers would want to advertise their products on the shows that they know he is on. Would you not call Leon Messi a wealth creator for Barcelona? Of course he is.
A happy worker is a productive worker.
Let us look at the case of the drivers of coaches and horses. In todays HMRC the driving of the coach (with their own limited company) for a company come under IR35, but the selling of manure to various farms etc. could be self-employment. Ludicrous

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Replying to johnjenkins:
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By whitevanman
28th Feb 2020 13:24

I am not sure what evidence you have that anything here is "against the will of the working majority". I would suggest that all available evidence (only ever anecdotal) points in the opposite direction. Those who pay their taxes in full measure feel aggrieved when they read of so called celebrities paying rather less. I think most people would agree that, whatever your views of the law, everyone should pay what is legally due under the law and efforts to dress up arrangements as something other than what they are, are to be challenged.

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Replying to whitevanman:
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By johnjenkins
02nd Mar 2020 10:10

As far as paying full taxes what is legally due under the law, I whole heartedly agree. Any artificial scheme used by whoever should also be vigorously challenged. However the working practices (employment status) is commercial and nothing to do with HMRC. nor should it be. Unfortunately, due to HMRC needing to stop the small self-employed (started by Gordon Brown to pay for his inept handling of our finances) and get them onto PAYE, we have a situation where there is a state of massive confusion over our subcontractors. This will affect our economy in a big way. Costs of all major projects will soar (oh, they already have, haven't they?). The main reason why some on PAYE feel aggrieved is due to the freedom the self-employed appear to have. Let me enlighten those that feel aggrieved. Earning over £50k, being self-employed, is no extended holiday. It's f...… hard work.

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Replying to 0705736:
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By IANTO
28th Feb 2020 13:22

"therefore he should pay tax as an employee" and he should then receive paid holidays, sickness benefits and pension rights, just as any other employee would receive.

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Replying to IANTO:
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By 0705736
29th Feb 2020 23:22

Why not?

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