Currently my working life seems to revolve around IR35. If it’s not delivering internal training here at Dataplan, it’s having discussions with clients on the upcoming changes.
For a change, I thought I would bury my head in the Tax Tribunals website and look at cases over the last couple of years that the Tribunal have reviewed and made decisions on. If you have ever read the outcome of a Tax Tribunal hearing you will realise that this has been a major dedication to duty!
Recent IR35 Cases
Amongst the recent cases have been some very high profile IR35 cases such as that of ITV morning TV fame Lorraine Kelly. Off Payroll Working is very much in the news, because of such hearings. There have been 11 cases heard by the Tribunal over the period of review. Only 3 have been found in HMRC’s favour. 1 was a partial success for both sides, that’s how complicated employment status can be, and the other 7 have found in favour of the taxpayer.
Bearing in mind it is HMRC that brings these case before the Tribunal, a success rate of just over 1 in 3 is not very good considering the cost of doing so to HMRC, never mind the cost monetarily and emotional, to the taxpayer in the original enquiry and then the actual hearing.
Christa Ackroyd & Lorraine Kelly
I’d like to look at 2 specific cases; Christa Ackroyd Media Ltd and Albatel Ltd, the company through which Lorraine Kelly invoiced ITV for the presenting work she does for them. Christa Ackroyd is a TV presenter on BBC Look North in Leeds presenting the 6.30 local news program, Lorraine presents her morning magazine style program on ITV.
Christa Ackroyd lost with a ruling of inside IR35, Lorrain Kelly won and was ruled as outside IR35. They are both TV presenters so why has Christa Ackroyd got to pay nearly £500,000 to HMRC yet Lorraine Kelly hasn’t? Both are TV presenters, Lorraine Kelly had editorial control, Christa Ackroyd did not. So, Lorraine Kelly had full control over how the programme ran, who she interviewed, Christa Ackroyd read the evening news. She was directly controlled.
Ready Mixed Concrete Case 1968
These 2 cases highlight the issues that came out of the infamous employment status case of Ready Mixed Concrete of 1968. This case looked at Mutuality of Obligation, Substitution and Control. If there is no Mutuality of Obligation on either side there cannot be employment. If there is an effective substitution clause there cannot be employment, and if there is little or no control on how the work is done there can be no employment. The control element of the Ready Mixed Concrete case effectively decided the 2 cases above (there is far more to both cases but control was the defining factor.)
Let’s look at Mutuality of Obligation. This was tested in the recent case of RALC Consulting Ltd. There is much to this case such as HMRC ignoring the outcome of their own Employment Status Indicator (now CEST tool) however the Judge considered that as there was no Obligation on either side to offer work, and accept work, IR35 legislation did not apply
These cases go to show that HMRC are not effectively policing the IR35 rulings and are ploughing on regardless to the Tribunal when careful consideration of cases, and dare I say detailed dialogue to ascertain the detailed knowledge on the working arrangements, could arrive at sensible solutions to cases.
From the 6th April 2020 medium and larger business in the private sector will be responsible for assessing their off payroll workers. If you require more information and advice on IR35 regulations we offer a range of consultancy services.
