IR35: Holmes under the hammer
HMRC is challenging the pay ITV host Eamonn Holmes received through his limited company. If Holmes is found to be in breach of IR35 rules, it is believed his company’s tax bill could be as much as £2m.
In an interview with the Mail on Sunday, the ‘This Morning’ anchor revealed that HMRC has launched a ‘test case’ against him, claiming unpaid taxes from the past seven years.
Holmes went on to state that if he loses the case other ITV stars will be targeted next. “If they win against me they will go after everyone else, everyone. Ant and Dec will be next,” he said. “I was in court in Central London for a week in June. I’ve been freelance for 28 years and that’s been okay. Now they’ve said it’s not okay.”
No verdict has yet been announced from the case. While HMRC’s chances of winning the case on mutuality of obligation grounds appear small, the tax authority may also have argued that Holmes, who presented the first ever GMTV for ITV back in 1993, has become integral to GMTV as an organisation.
The news comes as rumours of the Treasury finalising plans to roll public sector off-payroll rules to private firms gather momentum.
Presenters off the payroll
Holmes is not the only high-profile news anchor to come under the IR35 microscope. Earlier this year former BBC presenter Christa Ackroyd lost an appeal when the first-tier tribunal ruled her personal service company owed income tax and national insurance contributions (NICs) amounting to almost £420,000. Although she is understood to be appealing against that ruling.
BBC Radio star Jenni Murray is also reportedly facing a significant tax bill under IR35, following a winding-up of her PSC to join the BBC’s payroll.
Organisations such as the BBC have come under criticism for allegedly coercing presenters to claim salaries through personal service companies, therefore avoiding additional employer taxation liabilities.
Policy ‘has been the same for years’
Responding to the Eamonn Holmes interview, an HMRC spokesman told The Mail on Sunday: 'It is clear that most TV presenters will fall into the category of being employees based on the nature of their work, and the policy that sets this out has been the same for years.
However, Holmes claimed there was “no one more freelance than me,” and that HMRC had “reinvented the rules”.
Holmes is estimated to earn around £700,000 a year from his TV work, although the exact arrangements through which he is paid by ITV – which is understood to be the end user in the case – are not known.
His company, Red White and Green Ltd, had just under £3.1m in cash, according to its latest accounts dated 30 April 2017.
Those whose tax status is successfully challenged by HMRC under the IR35 legislation could see the tax bill for their companies double, with interest, National Insurance payments and penalties possibly added. The power also exists to transfer any liabilities from a personal service company to an individual director.
HMRC should ‘tread carefully’
Given the complexity surrounding IR35 legislation, leading voices from the contracting sector have warned HMRC to tread carefully when it assesses cases such as the one involving Holmes.
Qdos Contractor CEO Seb Maley commented that it was vital HMRC goes about this case and others in the right way and assesses the unique aspects of Holmes’ (and any other presenters’) working arrangements.
“[HMRC] cannot simply assume that one presenter’s status sets a precedent for every contractor engaged by ITV,” said Maley. “Given HMRC’s unpredictable nature, it’s increasingly important that freelance presenters, and all other contractors for that matter, are confident of their IR35 status, and can put forward a strong argument that they are genuinely in business on their own account.”
Dave Chaplin from ContractorCalculator told AccountingWEB that he believes in this particular case HMRC is focussing its attention in entirely the wrong place.
“The fact is that high-paid freelancers who earn six figures now pay more tax by operating via a limited company than an employee on the same salary,” said Chaplin.
“The tax efficiencies achieved by hiring someone on a self-employed basis are actually obtained by the firm that hires them, in this case, ITV, who would have avoided having to pay Employers National Insurance of 13.8% on top of whatever monies were paid to Mr Holmes. To suggest that Holmes has avoided tax is pointing the finger in entirely the wrong direction.
“HMRC changed the rules for IR35 in the public sector from April 2017, and now if they find a ‘deemed employee’ the Employers National Insurance is paid by the firm hiring the contractor,” continued Chaplin. “If ITV was a public sector broadcaster and Holmes’s situation was under the IR35 microscope under the new rules, ITV would have a tax bill to pay, and Eamonn Holmes would probably end up with a tax refund.”