IR35: Final score for Kickabout Productions
Sports radio presenter Paul Hawksbee has lost his battle to show that his relationship with TalkSport Radio lay outside of IR35, leaving his company Kickabout Productions Ltd with a tax and NIC liability of £143,126.
The first tribunal outing for this case produced a score-draw with one member of the FTT panel deciding that Hawksbee was within IR35, and there other that he was not. As Judge Scott decided Hawksbee was outside IR35, and he had the casting vote, taxpayer won his case.
HMRC has appealed that decision to the upper tribunal.
Under the IR35 rules the court must decide whether under a hypothetical contract between the worker (Hawksbee) and the engager (TalkSport Radio) would be one of employment or self-employment.
Kickabout Productions Ltd was required to provide Hawksbee’s services to present at least 222 shows per year, in effect a three hour show each weekday for 44 weeks of the year.
Hawksbee was paid a flat amount per show, and had no right to holiday pay, sick pay, employer pension contributions or paternity leave.
Hawksbee had been presenting this show for 18 years, but this case only examined the two contracts which were in place for the years 2012/13 to 2014/15. The first contract prohibited Hawksbee from working for any other UK radio broadcaster during the term of the contract, but he was permitted to do other work which did not interfere with his TalkSport duties.
The UT looked at these factors in turn.
Mutuality of obligation
This is the obligation on the engager to provide work, and for the worker to perform the tasks requested by the engager. If MOO is present it is generally considered to be a strong indicator of an employment relationship. However, HMRC’s CEST tool doesn’t consider this point.
This was a fundamental point of disagreement at the FTT. Both panel members agreed MOO was present, but Judge Scott thought it was not a strong indicator of employment in this case.
The UT concluded that TalkSport did have an obligation to provide work for Hawksbee under both of the contracts, and in turn Kickabout was obliged to make Hawksbee available, so MOO was present.
The UT concluded that the FTT made an error of law on this point. However, the UT decided not to refer the case back to the FTT, but remade the decision itself.
The FTT decided that TalkSport did have control over where and when Hawksbee provided his services, but not crucially not how he performed the task. HMRC argued that the FTT did not express a conclusion on whether there was sufficient control or not for an employment relationship, but the UT disagreed.
The UT considered the facts relating to control and found that TalkSport had little control over how Hawksbee did his work, but the radio station did have control over what tasks Hawksbee should perform, when and where he performed those tasks. The UT concluded there was sufficient control by TalkSport over Hawksbee to be consistent with an employment contract (inside IR35).
For completeness the UT considered what other factors pointed at self-employment or an employment relationship.
The pointers towards employment were:
- The fact that Hawksbee had been presenting the show for 18 years
- Hawksbee could not provide a substitute
- There were exclusivity provisions in the contracts
- The contracts required four-months’ notice of termination
The pointers to self-employment included:
- Fixed fee per show, which demonstrated a degree of financial risk
- Narrow task to be performed
- No worker rights such as sick pay, holiday pay
- No intention to form an employment contract
- No requirement for Hawksbee to complete training or undertake medicals
- Hawksbee was not part and parcel of the organisation
The UT considered that the factors above were not inconsistent with the hypothetical contract being one of employment.
How the decision was made
How the UT reached its decision is important for subsequent IR35 and employment status cases.
Since Hall v Lorimer , tax advisers have been taught to that it is necessary to look at all of the factors in the case which point either at employment and self-employment, and take a balanced view. However, in this case the UT appeared to ignore the “stand back and look at the picture” approach in favour of a ridged three step process:
- Is there sufficient MOO for employment relationship, if not go to step 2.
- Is there sufficient control for an employment relationship, if not go to step 3.
- Look at all the other indicators of employment and self-employment and take a view.
The UT examined the MOO factors and concluded that they were strong enough to indicate an employment relationship. This supported one ground on which HMRC appealed the case, and the UT considered this was sufficient to remake the FTT decision without having to consider the other grounds of appeal.
However, the UT did consider the matter of control and the other factors as described above.