Back in March 2021, we have highlighted a few of the IR35 disputes facing a handful of prominent TV personalities and celebrities.
Some of them, including Lorraine Kelly and Kaye Adams, successfully argued in Tax Court that the services they provided through their personal service companies did not fall under IR35. Others, notably Eamon Holmes, were less convincing and ended up with a hefty tax bill.
The factors influencing the Tribunal’s decisions in these cases centered on the reciprocity of the obligations of the two parties to the contract and the main criteria for review, including the law and reality of substitution. So-called “minor tests”, including whether someone is “in business”, have also appeared in the decision-making process.
It’s no surprise, then, that another similar high-profile case with these same issues made headlines in November 2021.
The unfortunate was former Sky Sports presenter Dave Clark. We say unhappy for several reasons. Sadly, Mr. Clark has suffered from Parkinson’s disease for several years, which ended his career as a broadcaster in the world of TV darts.
Added to his health problems was the Tax Court ruling that he / his personal services business had to pay £ 281,000 in taxes. This tax bill arose for the years 2013 to 2018 when the work he did through his company, Little Piece of Paradise Ltd, for Sky Sports in his professional darts coverage, turned out to be within IR35. .
A review of the evidence presented to the Tribunal showed that Mr. Clark had not been better served by what appeared to be a Sky Sports model contract unsuited to the role he performed.
We have often stressed the importance of ensuring that the contract between the principal and the contractor reflects the reality of working practices and again in this case, this was not the case.
A reading of the Tribunal’s case indicates that the defense was unable to produce a sufficient argument, supported by evidence, to show that reciprocity of obligations (MOO) was not present. Mr. Clark was effectively, under the contract, paid a retainer, whether he was required to work or not, depending on Sky’s coverage of various dart tournaments.
The judge concluded that in the revealing test of “control”, much like the Eamon Holmes case, in reality Mr. Clark had a limited right of substitution; that the contract provided for personal service and the need to follow certain rules and conditions found in employer / employee relations.
Mr. Clark’s defense argument that he met the “in business” test for a variety of reasons, including the preparation of home player briefing notes, the use of his own office and equipment has was dismissed by the Tribunal which found no compelling reason to conclude that he was self-employed.
The errors of approach, including the failure to critically examine the meaning, intent and application of the contract against IR35 criteria and a lackluster defense in the Tribunal cost Mr. Clark dearly.
While hindsight is seen as a wonderful thing, in Mr. Clark’s case it offers entrepreneurs, agencies and end users the opportunity to learn valuable lessons on how to avoid falling into the same traps:
- Do not use a “one size fits all” approach to contracts if you believe the role does not fall under IR35;
- Make sure that your draft contract is properly reviewed by specialists in the field and engage with them to align perception with reality to ensure that the correct determination of IR35 status is made;
- As contracts are renewed, amended or renewed, apply the same rigorous approach to their review as you did for the original;
- Make sure you keep evidence of how the contract worked in practice. For example, if there have been actual cases of substitution, document them fully.
Anyone can feel sympathy for Mr. Clark in his situation. Perhaps he will appeal the decision to a higher court, but for now, there remains another high-profile IR35 victory for HMRC.