Employment status and IR35 – a win for Stuart Barnes

Stuart Barnes, a top-level rugby player turned TV presenter, commentator and journalist, provided his services via his service company S & L Barnes Ltd which was incorporated in 2005. Mr Barnes’ services relate to rugby union and he provided his services to a range of organisations including Sky, The Times and The Sunday Times, Rugby World magazine, Ireland’s TV3 and Fox Sports in Australia. 

HMRC contended that IR35 applied to Mr Barnes’ contracts with Sky and that they were contracts of service making Mr Barnes an employee of Sky for tax purposes for the tax years 2013/2014 to 2018/2019. HMRC issued tax determinations charging tax and national insurance totalling £695,461.97. 

HMRC’s challenge was based on their view that two of the main tests pointing to employment were satisfied. Mutuality of obligation was present, as Sky was obliged to pay the contractual fixed annual fee in return for Mr Barnes to provide the services personally. Control was present, as Sky had first call on Mr Barnes’ services as well as control over the location and timing , ultimate editorial control and absolute control over exploitation rights. 

Mr Barnes did not dispute that mutuality of obligation and control were present. However, he appealed to the First-tier Tax Tribunal against HMRC’s challenge on the basis that he was in business on his own account and provided his expert opinion on national and international rugby as a freelance rugby commentator, expert pundit, journalist and author. 

The Tribunal considered the evidence and whether the hypothetical contract was a contract of employment. They applied the Court of Appeal’s decision in the case of Atholl House Productions Ltd and claimed that satisfying the mutuality of obligation and control tests did create an automatic presumption of employment and that it was necessary to look at any other factors which were relevant. This was a fact-sensitive case with the need to distinguish Mr Barnes’ services as a co-commentator and punditry in nature. In considering the pattern and terms of Mr Barnes’ work and his engagements with other organisations from which his income was not insubstantial, the Tribunal concluded that Mr Barnes was in business on his own account and therefore not an employee. Mr Barnes’ appeal was allowed. 

Moore Kingston Smith comment: 

This decision is in contrast to the decisions in the cases of other Sky broadcasters found to be inside IR35 e.g. Alan Parry (Alan Parry Productions Limited), Neil McCann (McCann Media Limited) and Dave Clark (Little Piece of Paradise Limited).  The facts of these cases differed and there is an apparent need to distinguish between services as a presenter, commentator and co-commentator/pundit.  It is clear from this decision that the determination of IR35 continues to be an extremely complicated matter and is highly fact-sensitive.  

However, the outcome of the Atholl House Productions case at the Court of Appeal has shown to be important regarding how to review and arrive at an accurate decision and the importance of being in business on one’s own account in determining status under IR35. HMRC guidance and the CEST tool must be updated to reflect this to help ensure that organisations and individuals subject to IR35 stand a chance in accurately determining their employment status position for tax.  

It remains to be seen if HMRC will appeal this decision. 

 The terms of the hypothetical contracts are those that would have existed between the worker and the client if the intermediary company did not exist. This is what the tax legislation stipulates must determine employment status for tax purposes.