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IR35 and deemed employment – Eamonn Holmes loses HMRC appeal

Written by Brabners LLP

In the recent case of Red White and Green Limited v The Commissioners for HMRC [2023], the Upper Tribunal concluded that TV presenter and journalist Eamonn Holmes was a deemed employee for IR35 purposes.

This case provides further important guidance for contractors, umbrella companies and agencies on IR35 assessments and the factors which affect a contractor’s employment status.

Facts of the case

This case concerned TV presenter and journalist Eamonn Holmes (the worker), ITV (the client) and Red, White and Green Limited (RWG) which is Mr Holmes’ personal service company.

RWG had appealed against determinations and notices from HMRC that employee National Insurance contributions and income tax were due as a result of the IR35 legislation in respect of income received from ITV under contracts for Mr Holmes’ services in tax years 2011-12 and 2014-15.  The case was originally heard by the First Tier Tribunal (FTT) which decided in HMRC’s favour. RWG appealed unsuccessfully to the Upper Tribunal (UT) which upheld the FTT’s decision.

During the relevant tax years, RWG had entered into four contracts with ITV for the provision of Mr Holmes’ services as a presenter on the tv show ‘This Morning’. Each contract was for around 1 year, with a short gap in between. It was a condition of the contracts that Mr Holmes had to provide his services on an exclusive basis, and to do so on specified days. Further, ITV had ‘absolute discretion and control over the editorial content of the Programme’. RWG had guaranteed that Mr Holmes would not undertake work for any third party which might conflict with his ITV work without the prior written authorisation of ITV.  As part of the contracts, Mr Holmes was entitled to benefits such as a car for travel to and from the studio, but he was not entitled to holiday or sick pay.

Mr Holmes was paid a fixed fee to provide his services on specified days and on ‘such other dates and locations as notified…in advance by [ITV] at [its] sole discretion’. Mr Holmes was to be ‘as flexible as possible’ in relation to these rescheduled dates. Moreover, if ITV cancelled any dates and was unable to rearrange for reasons other than Mr Holmes’ unavailability, he was entitled to payment in full. Mr Holmes said that, in the interest of commercial relations, he would not request payment in these instances. However, the FTT concluded that the ‘fact that in practice… Mr Holmes may have decided not to enforce his contractual rights, does not detract from the existence of that right’. The FTT concluded that the obligation on ITV to provide work and the requirement for RWG to accept it meant that there was sufficient mutuality of obligation which, together with other factors, meant that Eamonn Holmes was a deemed employee.

The FTT also concluded that ITV exercised a sufficient degree of control over Mr Holmes to point to an employment relationship, despite the fact that Mr Holmes had a high degree of autonomy and influence over the content and direction of the shows. ITV had sole discretion as to the date and location for work to be carried out, they retained editorial control over the programme, and Mr Holmes required permission to undertake work for a third-party.

Overall, the FTT determined that the hypothetical contract between Mr Holmes and ITV would have been one of employment and found Mr Holmes liable to PAYE and NIC, as notified by HMRC.

The Appeal

RWG appealed to the UT, arguing, amongst other things, that the FTT had wrongly disregarded certain factors in its overall consideration and failed to consider the whole picture.

In making its decision, the UT reiterated an important principle which has been established through case law that when determining someone’s employment status, it is important to step back and look at the relationship as a whole, rather than fixating on individual factors or contractual terms.

Overall, the UT was in agreement with the FTT’s conclusions regarding the degree of control which ITV exercised over Mr Holmes, noting in particular that it would be “career suicide” for the presenter to disagree with key ITV decisions.

It is relevant to note that when Lorraine Kelly, another ITV presenter, was made subject to similar notices and determinations by HMRC, she was found to be self-employed for IR35 purposes. This highlights that consideration of one judgement will not necessarily provide the answer to how future cases will be decided. Analysis of a person’s employment status is a highly fact-sensitive exercise and, as the UT noted in Mr Holmes’ case, it is important to look at the whole picture. Whilst robust contractual terms are important, umbrella companies should be aware that tribunals are increasingly interested in the factual reality over the contractual wording.

This bulletin is for general guidance purposes only and should not be used for any other purpose.

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