IR35: Sky Sports presenter handed £356k tax bill
Sky Sports presenter Alan Parry has lost his £356,420.37 IR35 appeal. Rebecca Seeley Harris summarises the case and finds that contract drafting let the side down again.
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Para 76 et seq shows that following Atholl House, only IR35 hypothetical contract cases can ignore a well-drafted substitution clause that would otherwise cause no MOO i.e. non-IR35 self-employment cases would benefit from a well drafted substitution clause per my comments here (since there is then no "Stage 2" process):
https://www.accountingweb.co.uk/any-answers/disagreement-with-employer-r...
I wonder how many more 'celebrity' IR35 cases are in the pipeline - at a potential £350k a pop HMRC must be scrutinising anyone in the media....
Media personalities are comparatively easy targets.
I was surprised Lorraine won
Clealy the shows are directed and it is the personality that is wanted, not a skill.
BBC et al. do not want their star performer turning up on other channels doing the same thing
I believe this demonstrates what I have always said to clients and when lecturing. The client wants to exercise control over the contractor as they would over an employee but without the responsibilities of being employer and being liable for NIC. The client therefore insists on the contractor using a company since the client will not take on the contractor in a self-employed capacity. The contractor wrongly believes or is wrongly advised that by adding a substitution clause that is ineffectual it takes the company outside IR35. HMRC do not challenge it or open enquiries.
Generally, the contractor has little or no say in the terms of the contract and must accept it or work for someone else. HMRC let this situation persist for far too long, leading contractors to believe they were outside IR35 as it was never challenged. It then became too big for HMRC to ignore and they decided to attack certain contractors retrospectively and then change the law to make the client liable for the PAYE and NIC.
The amount of additional tax at stake is presumably a lot less than quoted as there will be a credit for tax already paid by the company on its profits and by the individual on his dividends or remuneration.
The amount of additional tax at stake is presumably a lot less than quoted as there will be a credit for tax already paid by the company on its profits and by the individual on his dividends or remuneration.
I've wondered about this for 20 years and have never had a definitive answer from any tax lecturer. The CT600 is usually way out of time for amendment by the time an IR35 tax bill is assessed so no corporation tax rebate can be claimed for the years in question. The loss created by the huge Deemed Payment can of course be carried forward but there will be no future profits (or very little) to claim loss relief against. So how does one avoid double-taxation?
The only bright side is that the company usually lacks the funds to pay such a huge PAYE bill after so many years and the debt cannot be transferred to the director unless he was totally cavalier with his IR35 obligations. That is usually very rare as IR35 is such a grey area in most cases.
Where IR35 is a big risk, perhaps it is best to pay all post-tax profits as dividends to a holding company so they escape any future tax demands. Would that work or are there anti-avoidance rules? Quite a few businesses have similar arrangements now so the trading company has insufficient funds to pay potential legal claims, although I've often wondered if they actually work if push comes to shove.
What happens next? Company has net assets of £61 at 31/3/20, and accounts to 31/3/21 not yet filed.
The English in this article is poor. This is in part because the nuances of the regulations are not well understood by the writer - who is seeking to camouflage this in a language style they think is ‘legal-speak’. It is not (as good legislation is unambiguous and plain in utterance) and nor is it the domain of their intended reader.
A key problem was the standard form Sky contracts contained ambiguity.
Arguably, the rules of evidence were not applied to the HMRC notes of meeting with Sky, being claimed as hearsay and shredded as they also contained conflicting information.
On the contrary, anyone who registered and attended the public video hearing would have noted that Alan Parry gave cogent witness evidence under cross-examination and he was found to be credible. He was the only person in the hearing that could give detailed factual circumstances., and did do so.
In addition the market forces were contained in the appellant’s submissions and pronounced in Contract 2 but nowhere will you find the detailed analysis in the Decision- the actual appellant’s submissions and appellant’s logic was applied to define “ad hoc as and when” (ie from time to time) and “required”. This was deduced as 1 match per week in a 10 month football season. To claim that Alan Parry could be allocated any role (“What”) was established to be commercially nonsensical, again logic applied within the appellant’s submissions in furtherance with s.49(4) ITEPA which is the IR35 Statute pertaining to all the circumstances of which the contract was part of. Autoclenz was certainly not relied upon.
Furthermore, Alan Parry gave Sky priority because they had the market place footprint. In consideration of this commercial arrangement with Sky, the appellant’s fees dropped by considerable £72,000 and it was established this was down to Sky loosing the Champions League broadcasting rights which was pronounced in Contract 2, which was demonstrably a commercial contract subject to market forces.
In addition, the appellant had to indemnify Sky, there was no obligation on Sky to provide work, there was a pro rata payment clause, an immediate termination clause on top of a legal right of substitution and/or subcontract out the services… these were entirely commercial terms. Not employment.
Now do we see the real picture that was actually pronounced to the FTT but not particularly detailed in the Decision.
All these points were argued plus, as stated, HMRC did not provide any cogent witness evidence which could be subjected to cross-examination re their notes of meeting with Sky.
So, if anyone was in fact tuned into the video meeting on 27, 30 and 31 May 2022 then they would have been in a better position to understand the appellant’s submissions in the appeal hearing proper. Then draw on their own conclusions.
It’s not sour grapes, for instance significantly HMRC v Atholl House Productions Ltd CoA 26 April 2022 judgement was highlighted in the Authorities and legal advice was taken as the appellant’s Skeleton was produced by counsel plus market forces argued on the appellant’s witness evidence which was subject to hours of cross-examination and Alan Parry was found to be a credible witness.
Painting the picture is very different, given the above context and therefore just reading the Decision in isolation without knowing of the whole detailed and colourful picture is a bit like painting another picture with a limited pallet of colour.
I could go into very long grass detail but will not. Simply, standard form contracts were criticised by the judge as they had ambiguity… but, the pleadings were on the contractual factual matrix.