On Thursday 7 July 2022, it was announced that well-known Sky Sports football commentator, Alan Parry, had lost his appeal against a £356,000 tax bill, after it was confirmed that his engagement with BskyB was inside of IR35.
From 2015-2019, Parry held a limited company contract between Alan Parry Productions Limited and BskyB, and throughout this time considered himself as self-employed. Following the 3-stage test established in the Ready-Mixed Concrete case (which was further clarified in the Court of Appeal ruling in Atholl House), the Judge however, declared that Parry was in fact inside of IR35, due to Mutuality of Obligation (MOO).
Described in Practical Law as “the obligation on the employer to provide work and the obligation on the employee to accept that work”, MOO appeared evident in Parry’s contract terms with BskyB, which enabled them to make Parry work as either a commentator, presenter, interviewer, guest or other participant, and work as and when required alongside complying with all reasonable directions (Contractor Calculator).
In a recent statement, Dave Chaplin, Chief Executive of tax compliance company IR35 Shield, supported the court’s decision, suggesting that the contract was “too widely drafted”, giving BskyB “wide-ranging rights and obligations”. After attending the three-day tribunal, Chaplin stressed that “had the contracts been more carefully drafted to align with the actual relationship, the decision may have been different" (Contractor Calculator).
As the court have concluded Parry to be a “disguised employee” under IR35 rules, he is therefore liable to pay £222,474 in income tax and £133,945 in national insurance.
What are the impacts for employers?
Considering there has been a number of recent cases that have identified contracts as the main issue when it comes down to determining an IR35 status; we should expect to see contracts between freelance workers and their employers placed under scrutiny by HMRC in the months ahead.
Historically there has been a lack of attention placed on the contracts between the parties (Financial Times) and therefore Rebecca Seeley Harris, a specialist legal consultant in employment and tax status, has insinuated that the courts will begin focusing on the written terms of contracts following the Parry case
Comments by both Chaplin and Seeley Harris suggest that the outcome of the Parry case should be taken as a stark warning for those working in similar arrangements, and that employers and freelancers should ensure that contracts are up-to-date and factually correct, to avoid falling inside of IR35 (Financial Times).
We should also expect HMRC to enforce stricter rules for hirers who - since the IR35 reform - have become responsible for determining the status of contractors.
Over the past few years, several TV presenter tax cases have struck the news headlines due to the inaccuracy of their IR35 determinations. Previously, two IR35 appeals involving BskyB contracts with presenters Neil McCann and Dave Clark gave HMRC the right to obtain unpaid tax, due to the provisions of the contract demonstrating employment.
Contrastingly however, in 2019, well-known broadcaster Lorraine Kelly won her case over a £1.2m tax bill after arguing that she had a high degree of control over her show and what other entertainment activities she decided to involve herself in. More recently, Adrian Chiles similarly won his 2022 case against HMRC over a £1.7m tax bill following the judge’s conclusion that the work contracts were for services and not of employment - meaning IR35 did not apply.
As government guidelines surrounding IR35 continue to evolve, we are seeing more businesses and individuals becoming confused around what they must be doing in order to demonstrate full IR35 compliance.
Although HMRC’s CEST tool supports hirers and agencies with the IR35 determination of a contractor; critics have argued that the tool is not aligned with IR35 case law and fails to cover key aspects of employment law such as MOO.
In order to demonstrate full compliance, hirers should complete a status determination statement for each contractor engaged. Similarly, HMRC should be working to develop the widely used CEST Tool to cover all aspects which determine an individual’s IR35 status.
Visit our blog to find out more on the disadvantages of using HMRC’s CEST Tool.
How can I demonstrate full compliance?
Here at Bar2, we believe that every business should have access to the correct support and advice to guide them seamlessly through the IR35 process.
Our Bar2 IR35 Protect service is designed to assist our partners in demonstrating full compliance within the supply chain. Using a range of intelligent software, the service makes it simple to quickly and accurately determine, communicate and monitor contractors’ IR35 status, with insurance backed decisions along the way.