< Go Back BBC Narrowly win latest IR35 Case Posted: Sep 25, 2019 A split
tax tribunal decision found the activities of BBC presenters Joanna Gosling,
Tim Willcox and David Eades fell within IR35; tax and NIC are therefore due on
payments made to them by their Personal Service Companies.
This is
the fifth case involving BBC TV and radio presenters who were accused of not following IR35 rules in respect of contracts for work with the BBC through their personal
service companies (PSC).
It is a
narrow but significant win for HMRC. The case took eight years
to reach the First Tier Tribunal (FTT), nearly two working weeks to be heard in May 2018, and
then almost a year and a half for the case report to be published.
Eades was an employee of the BBC until he took voluntary
redundancy 2003. Gosling
and Willcox were previously engaged by the BBC on a freelance basis for several years but at various dates in 2003 and 2004, the presenters were asked by the BBC to set up
personal service companies (PSC) to deal with theoir ongoing work for the BBC. Eades already had material freelance work outside the BBC but the others less so.
The FTT
found the presenters were forced to set up PSCs by the BBC, and that the
BBC knew this would shift the risk of tax liability to the PSC's rather than the BBC. The presenters were not
specifically warned about this. The judge noted an "imbalance of bargaining” power between
the BBC and the presenters when these arrangements were initially set up. So each PSC
entered into a series of contracts with the BBC to provide the services of the
respective presenter over periods covered by the tax years 2006/07 to
2013/14. These years became the focus of the long running disputes with HMRC. It was found that during those tax years all
the presenters did non-BBC work to varying degrees but in 2014 all three
presenters ceased working through their PSCs and then became employees of the BBC.
HMRC
raised determinations for all the tax years in question, but the appelants argued the PAYE determinations for the earlier years (broadly before
2008/09 or 2010/11) were 'out of tim'e so could not be enforced. This was on the basis that if HMRC
could establish the appellants advisers or the appellants themselves were careless and that careless
behaviour resulted in the tax underpayment, a six-year time limit would apply to the
earliest of ther disputed years rather than the usual four years, and therefore tax would be payable for two
extra years.
HMRC
argued that the presenters’ advisers did not properly consider IR35 when dealing with their
PSCs and this was therefore 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. HMRC pointed out that Simmons
did not contact HMRC’s IR35 contract review service, but the FTT didn't 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 appellants and their advisers had acted in good faith in
taking a view, at the material time, that IR35 did not apply, and so were not careless about their
clients’ tax affairs in any way.
The FTT panel could not agree on
the outcome. Judge Morgan had the casting vote and she decided in favour of
HMRC, so the case was found on her judgment.
On the basis that two tribunal judges took
opposing views and the length of time this matter had been dragging on before the FTT it is easy to see why determining the position for IR35 can be so difficult and how unfair it is to now expect businesses to
make theri own IR35 determinations in the light of off-payroll legislation due in 2020. Of course, the presenters were
investigated under the private sector IR35 rules (ITEPA 2003, chapter 8) but if they had to deal with the new payroll rules contained
in ITEPA 2003, chapter 10, then the BBC would have picked up the extra
liability they passed onto the presenters, by way of the employers NIC they
sought to avoid.
If you have trouble with the taxman, contact us , in confidence, for a no obligation chat about how we may help you achieve the best outcome
