Contracts between freelance staff and their employers will come below renewed scrutiny by HM Revenue & Customs after Sky Sports commentator Alan Parry misplaced an enchantment in opposition to a £356,000 tax invoice.
The soccer commentator, 74, contested an HMRC declare that the contracts held between his restricted firm, Alan Parry Productions Limited, and BSkyB over the 5 years to April 2019 amounted to an employment relationship, fairly than self-employment.
Under IR35 guidelines, a set of tax legal guidelines which govern off-payroll staff, if a contractor is deemed to be a “disguised employee” for tax functions, fairly than genuinely self-employed, they’re accountable for earnings tax and nationwide insurance coverage contributions.
A judgment this week following a first-tier tax tribunal listening to discovered “the overall impression is that the relationship between BSkyB and Mr Parry was one of employment”. HMRC stated Parry owed £222,474 in earnings tax and £133,945 in nationwide insurance coverage contributions, totalling £356,419.
Professional providers consultants stated the judgment would act as a warning to these with comparable preparations. “It is a worrying direction of travel for other individuals with similar facts to Mr Parry as this case only encourages HMRC to continue their efforts to review this sector and those working in it,” stated Tim Stovold, associate at accountancy agency Moore Kingston Smith.
Parry’s case highlights the staggering value of getting IR35 incorrect. “After Eamonn Holmes, Gary Lineker, Lorraine Kelly and several others, Alan Parry is the latest in a long line of high-profile presenters caught up in IR35 cases with huge tax liabilities,” stated Seb Maley, chief govt of insurance coverage and tax adviser Qdos. “It makes you wonder who HMRC will target next.”
Given the complexity of IR35 guidelines, it may be troublesome to know which manner a case will go. Several presenters have been caught out by the foundations given the character of their work — the issue of discovering a substitute, the necessity to function inside strict editorial tips and prevention from working for different broadcasters.
Chris Leslie of Tax Networks Limited, the lawyer who represented Parry, stated the BSkyB contracts are “a bit of a problem” as a result of they observe a normal kind. Speaking of Parry’s case, Leslie stated the contract “contained ambiguity” which gave Sky extra management over Parry than was needed or wanted.
Two earlier IR35 appeals involving BSkyB contracts with presenter Neil McCann and former presenter Dave Clark went in HMRC’s favour. Dave Chaplin, chief govt of tax compliance firm IR35 Shield, stated contractors and employers ought to be conscious that the “contract is king”.
Rebecca Seeley Harris, a specialist authorized guide in employment and tax standing, stated the result of Parry’s case “definitely makes it more likely that others will also be found inside IR35 because historically there has not been enough attention placed on the contracts between the parties and the courts are now shining a spotlight on the written terms of the relationship.”
There are at present “hundreds of cases out there in dispute,” in response to Dawn Register, associate within the tax dispute decision staff at BDO, together with not solely TV presenters however a variety of contractors from IT technicians to administration consultants.
The Parry dispute associated to employment between 2014 and 2019. Since April 2021, the choice about whether or not freelancers working within the personal sector ought to be thought-about self-employed for tax functions — generally known as “outside IR35” — or employed has moved from contractors to their hirers. The change places the ultimate accountability for paying the precise tax on the hirers.
“The regularity of these IR35 decisions and the fact that they are creating so much uncertainty is increasing the need for HMRC/HMT to review the law on employment status for tax purposes,” stated Penny Simmons, authorized director at Pinsent Masons. “Now more than ever, businesses need clarity when making decisions that could affect tax costs.”
Other presenters have had profitable appeals. In February, presenter Adrian Chiles received a case in opposition to HMRC over a £1.7mn tax invoice, when a choose dominated there was “no suggestion Mr Chiles set out to avoid tax”. In 2019, broadcaster Lorraine Kelly received her case over a £1.2mn invoice.
The authorized battle by TV sports activities host Gary Lineker over a £4.9mn tax invoice continues.
HMRC stated the judgment confirmed its view that the off-payroll working guidelines utilized within the Parry case. “These rules are in place to create a level playing field for all workers by ensuring that people who work like employees, but through their own limited company, pay the same amount of tax as an employee would,” it stated in an announcement.
