Three BBC presenters lose IR35 caseby
A split tax tribunal decision has found the work of BBC presenters Joanna Gosling, David Eades and Tim Willcox fell within IR35, so tax and NIC are due on payments made to them by their personal service companies.
This is the fifth case involving TV and radio presenters (following Paul Hawksbee, Christa Ackroyd, Lorraine Kelly and Kaye Adams) who were accused of not complying with the IR35 rules in respect of contracts performed through their personal service companies.
It is a significant win for HMRC, but it was hard-won battle. The case took eight years to reach the first tier tribunal (FTT), nine days to be heard in May 2018, and sixteen months for the case report (TC07377) to be published. Tax consultant David Kirk, who supported the taxpayers throughout that period, said there are lessons for advisers who are dealing with similar IR35 disputes.
Gosling and Willcox were previously engaged by the BBC on a freelance basis for a number of years. Eades was an employee of the BBC until he took voluntary redundancy for personal reasons in 2003.
At varying dates in 2003 and 2004, the presenters were asked by the BBC to set up personal service companies (PSC) in order to offer their services to the BBC. Eades had already built up a portfolio of freelance work outside of the BBC when he was approached by the broadcaster to work on the World programme.
The FTT found the presenters had been forced to set up PSCs by the BBC, and that the BBC knew this action would mean the tax risk and liability would be transferred to those companies from the corporation. It seems that the presenters were not warned about this. The judge noted the “imbalance of bargaining” power between the BBC and the presenters in this regard.
Each PSC entered into a number of contracts with the BBC to provide the services of the presenter. These contracts, performed over periods in the tax years 2006/07 to 2013/14, were the subject of the disputes with HMRC. During those tax years all the presenters did some non-BBC work to varying degrees. In 2014 all three presenters ceased working through their PSCs and became employees of the BBC.
HMRC raised determinations for all the tax years in question, but the taxpayers argued that the PAYE determinations for the earlier years (broadly before 2008/09 or 2010/11) were out of time so could not be enforced.
If HMRC could establish the advisers or the presenters were careless and that careless behaviour created a tax underpayment, a six-year time limit would apply to the disputed earlier years rather than four years, and tax would be payable for two extra years.
HMRC argued that the presenters’ advisers did not consider IR35 when dealing with their PSCs and this was a careless approach. The FTT noted that Simmons (Eades’ adviser) took such care as he reasonable could by:
- undertaking professional training
- reviewing the relevant documents and discussed the situation with his client
- consulting text books and similar authorities
- considering the circumstances including control and mutuality.
Simmons did not contact HMRC’s IR35 contract review service, but the FTT did not think that was relevant. The judge commented: “It is open to professionals to rely on their own assessment of the law rather than HMRC’s view of it.”
The FTT found that all the individuals and advisers concerned acted in good faith in taking a view that IR35 did not apply, and were not careless about their clients’ tax affairs in any way.
Like the Hawksbee case the FTT panel could not agree on the outcome. As Judge Morgan had the casting vote and she decided in favour of HMRC, the case was found on her judgment.
Julia Kermode, FCSA chief executive noted: “Given that the two tribunal judges took opposing views, this case illustrates how unfair it is to expect businesses to make IR35 determinations in the light of off-payroll legislation due in 2020. If judges can't reach an easy conclusion how on earth can firms without access to expertise be able to reach a conclusion?”
Dave Chaplin of Contractor Calculator also commented: “The presenters were investigated under the private sector IR35 rules (ITEPA 2003, chapter 8). Had the presenters been investigated under the new off-payroll rules contained in ITEPA 2003, chapter 10, the broadcaster would have had to pick up the extra tax bill they passed onto the presenters, by way of the employers NIC they sought to avoid.”