If we didn’t know it already, the Court of Appeals decisions in the Paul Hawksbee and Kaye Adams cases have reaffirmed the complexity of IR35 decision making and the need for regular IR35 contract and working practices reviews.
Talksport host, Paul Hawksbee narrowly won his IR35 case in 2019 when the First Tier Tribunal (FTT) found in his favour by deciding that there was no obligation on the part of Talksport to provide work and that the services they controlled were restricted to delivering the show. HMRC appealed and the Upper Tier Tribunal (UT) agreed with them and ruled that Hawksbee was indeed an employee on the grounds that:
· Mutuality of obligation was present because of the express engagement of Hawksbee’s company to provide a three-hour daily show, Monday to Friday along with preparation and rehearsal time
· Hawksbee had to make himself available for work for at least 222 days per year and give Talksport “'first call' on his services
· The right for either party to terminate the contract on four months’ notice and for Talksport to suspend Mr Hawksbee in certain circumstances made little sense if Talksport was not obliged to provide him with work.
· There was a sufficient framework of control to satisfy the test for employee status. Talksport had the ultimate right to decide on the form and content of each episode and had control over where and when Mr Hawksbee did his work.
· The other factors considered by the FTT (workers’ rights such as sick and holiday pay, medicals, training, paternity leave pensions etc) were either outweighed or had no relevance once the UT had concluded that TS was obliged to provide work.
Hawksbee appealed the decision of the UT on the basis that mutuality did not exist but Judge David Richards throughout all of the presented arguments and The Court of Appeal dismissed Hawksbee’s appeal finding that there was mutuality of obligation and in favour of HMRC.
The decision was released on the same day as another Court of Appeal IR35 case decision, HMRC v Atholl House Productions Limited [2022] EWCA Civ 501, where the Court found that TV presenter Kaye Adams was also an employee, in that case overturning the decisions of the lower courts who had found in Ms Adam's favour.
Whilst HMRC may be riding high on the back of what would appear to be two conclusive wins, it is important that contractors put into perspective the particular circumstances of these cases and to highlight the obvious differences with the majority of contracting roles.
Whether it is Paul Hawksbee, Kaye Adams or indeed any of the other high-profile presenters we have seen fight it out with HMRC, the contracts held and working practices of these presenters, whose personality the show is often so closely dependant on are very different from, say, an IT contractor providing their services to a financial institution.
For the majority of contractors, proving an Outside IR35 position should be more straightforward with little or no requirement for personal service and distinct lack of mutuality of obligation and control. The Judge in the Hawksbee case also reminded us of the need to consider if the contractor is operating their own business. It is clear from both cases that it is key to regularly review both contracts and working practices. The more frequently these are reviewed and backed by evidence the sooner any HMRC challenge can be headed off. Both of these cases have been long and protracted meaning additional costs and stress for the taxpayer.
And finally, it was encouraging to see that Judge David Richards commented on the lack of a statutory definition for self-employment, “it would certainly be desirable if, there were one clear test or approach to determining whether a person was an employee”. We can only hope that in the future we can arrive at a solution that takes away the current mess we find in the world of IR35.