Radio host Paul Hawksbee has seen off an IR35 challenge in which HMRC demanded tax and NIC of £143,126 from his company Kickabout Productions Ltd.
This is the fourth in a series of cases involving TV and radio presenters (following Ackroyd, Lorraine Kelly and Kaye Adams) who were accused of not complying with IR35 rules in respect of contracts performed through their personal service companies. There may be further IR35 cases concerning actors and presenters in the tribunal pipeline.
Paul Hawksbee has worked as a comedy scriptwriter since 1985, writing for a number of successful TV shows, including all 161 episodes of ‘Harry Hill’s TV Burp’. In January 2001, on the advice of his accountant, he set up Kickabout Productions Ltd to provide his services on a range of projects. Around the same date, he began to co-present a live show each weekday on Talksport Radio with Andy Jacobs.
This case (TC07230) concerned only his work for Talksport in the tax years 2012/13 to 2014/15, which represented around 90% of the income of Kickabout Productions in that period. Hawksbee was contracted to present at least 222 shows per year, at £575 per programme plus expenses, but he was only paid for the shows he presented.
The FTT examined two written agreements which covered the three-year period. Each agreement with Talksport was renewed every two years.
However, the agreement which commenced on 1 January 2012 took the form of a letter between Talksport and Hawksbee, not a contract with his company Kickabout Productions. The tribunal accepted this was an administrative error, and that it should be treated as a letter from Talksport to Kickabout.
The FTT also heard evidence from the Talksport programme director Liam Fisher and Hawksbee himself.
This was not a slam-dunk victory for Hawksbee.
There are two members of each first tier tribunal: a judge and a lay member. Charles Baker, the lay member, did not agree with Judge Scott on three points, which could tip the next IR35 case in favour of HMRC.
Mutuality of obligation
If there is a mutuality of obligation for the engager to provide work and the individual to accept it, this is an indication of an employer/employee relationship.
It appears that Hawksbee had to perform each show personally, as there was no right of substitution mentioned in either of the written agreements or in other verbal evidence.
However, Talksport didn’t have to broadcast each live show and it did, in fact, cancel the show on two occasions at short notice after terrorist incidents. This led Judge Scott to conclude that the radio station was not obliged to provide work for Hawksbee, and overall there was no mutuality of obligation.
Baker disagreed on the basis that the written agreements required Hawksbee to present at least 222 shows a year, notwithstanding the fact that Hawksbee could decline to present a particular show in the case of illness or other factors.
Thus, within the agreements, Talksport had an obligation to provide the medium of the daily show and Hawksbee had an obligation to present each show. In Baker’s view, a mutuality of obligation did exist.
A key point was whether Talksport exercised control over Hawkbee’s work in writing and presenting his daily show. HMRC argued that it was enough for the right of control to exist and that it was not necessary for control to be exercised in the relationship, but Judge Scott disagreed. He noted that this area of evidence was apparently well-rehearsed by both Hawksbee and the Fisher.
The FTT concluded Talksport had control over where and when the work was performed but the radio station did not control how Hawksbee performed his services or what was included in the programmes.
Part and parcel
Where an individual has rights and obligations similar to those which would apply to an employee and is regarded as part and parcel of the engager’s organisation, this points towards an employee/employer relationship.
The Talksport contracts did not mention rights in respect of holiday, sick pay, pensions or paternity leave. Hawksbee did not attend staff events, had no line manager, and was not obliged to undertake training or appraisals. Judge Scott took the absence of these factors as indications that no employee/employer relationship existed.
Baker took a different view, agreeing with HMRC that contracts between companies would not cover sick pay etc, thus the absence of such rights cannot be considered as pointing away from an employment relationship. Baker also argued that FTT cannot know whether the hypothetical contract would or would not contain employment rights.
HMRC argued that Hawksbee took no financial risk and was not in business on his own account, as there was no realistic possibility of making a loss and no means to increase his profits from the Talksport engagement.
This was a particularly blinkered view as Hawksbee was also performing work for other customers in the period and turned down work offered in order to complete the Talksport shows. Judge Scott commented that Hawksbee’s financial risk turned on his opportunity cost.
Baker concluded that Hawksbee would be treated as an employee under a hypothetical contract which ignores Kickabout Productions in the relationship with Talksport, and thus IR35 would apply to his earnings from Talksport.
However, Judge Scott, in looking at the picture presented by all factors concluded that the relationship was not one of employment and IR35 did not apply. As Judge Scott had the casting vote, the FTT found for the taxpayer.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.