Well-known television presenter Lorraine Kelly has successfully appealed an IR35 tax bill assessed by the HMRC at the sum of almost £900,000.
Albatel Limited, Ms Kelly’s limited company, saw the HMRC conduct an initial inquiry into its engagements with ITV Breakfast Limited, which took place between September 2012 and July 2017, the conclusion of which was that the engagement fell within the scope of IR35. Disagreeing with this outcome, Ms Kelly appealed the determination of the HMRC on the grounds that ‘…the nature and range of [her] work mean that she should be treated as a self-employed star.’
It was agreed by Judge Jennifer Dean that Ms Kelly was obliged to provide a personal service to ITV Breakfast, with her company having no employees to provide in her absence and the contractual agreement naming Ms Kelly specifically as the individual engaged to perform the services. Further, it was ruled that mutuality of obligation was present between Albatel Limited and ITV breakfast, however this only amounted to the “irreducible minimum”, rendering this aspect inconclusive of the issue.
However, this case turned on the matter of control. Acting on behalf of HMRC, Miss Elisabeth Roxburgh presented that ‘…what matters is where the right of control lies…’ and that this ‘…undoubtedly…’ lay with ITV Breakfast. It had the ultimate responsibility for the output of its broadcasts of which Ms Kelly was a part; controlling timings, editing programmes and making final decisions on content all contributed to Ms Roxburgh’s submission that ‘…the limits of ITV’s practical control in respect of Ms Kelly at the point of delivery are the same as they would be in relation to an employed presenter’. Emphasis was also placed on the irrelevance of whether control was exercised in practice – what matters is, did the right of control exist.
Unfortunately for HMRC, the tribunal ruled their satisfaction that control of Ms Kelly’s work lay, in reality, with Ms Kelly herself. It is the view of the tribunal that the ‘…level of control falls far substantially below the sufficient degree required to demonstrate…’ an engagement of disguised employment. They conceded with Albatel’s statement that Ms Kelly was engaged to provide a programme with a ‘…free rein…’ in a manner of her choosing, using her skills as she saw fit. Ms Kelly provided significant contribution to the format and planning of future broadcasts of which she was a feature and provided evidence to demonstrate her influence over the decisions of ITV Breakfast. Furthermore, Albatel Limited provided the services of Ms Kelly to various other clients without any real restriction being imposed by ITV.
Judge Dean added to her conclusion that ‘…contrary to being part of a jigsaw, Ms Kelly was the jigsaw’, demonstrating the argument that Ms Kelly was not part and parcel of ITV Breakfast, but that she was a brand in her own right, a product purchased by ITV.
It could be said, following this judgement, that the bar for setting out an employment-like level of control is significantly high. It is easy to draw conclusions based on the nature of Ms Kelly’s work and, in reading the judgement, it is apparent that evidence has been presented to rebut any presumption that ITV Breakfast sought to, or in practice, controlled Ms Kelly to the degree required to promote a relationship of employer-employee.
Although defeated, this case gives valuable insight into the inquiry methods adopted by HMRC and the approach that they take, particularly in relation to control. The HMRC’s argument clearly demonstrates that they not only take account of what has actually taken place during an engagement, but they will consider the rights of each party and how these reflect in relation to an employment relationship. The key is to ensure that all parties to an engagement fully intend, and understand the nature of, an arms-length, business-to-business engagement.