Celebrity media freelancers beat IR35 by being in business on their own account

Two new IR35 cases highlight the importance of ‘being in business on one own’s account’ to freelancers in the media sector who wish not to be caught by the legislation.

The first case, involving TV star Lorraine Kelly, found she had a “variety” of clients; did not need an ‘OK’ to engage them and was a brand in her own right (her Lorraine show for example).

The second case (in that its judgment was released after the Kelly case), involved Kay Adams, a presenter of Loose Women, who was probed by HMRC for contracts with the BBC, notably The Kay Adams Programme.

‘First call’

As well as having her name in the show’s title too, Adams could work for whoever she chose and the BBC lacked “first call” on her time -- contrary to what her contract stated. And such clients spanned her two decades in the media industry.

Also unifying both presenters, throughout their probed engagements, each operated without the statutory hallmarks of employment – such as sick pay, holiday pay, pensions and maternity leave.

For Adams arguably more than Kelly, such distinctions were crucial because the judge in her case did uncover a few signposts pointing to her being caught by IR35 which, if conclusive, would have cost the 56-year-old £124,000 in taxes.

For example, Adams had a substitution clause but it was found to be non-effective; she took no real, substantive ‘financial risk’ – a characteristic of being an independent business, and Mutuality of Obligations exited.

‘Meaningful’

But more determinative in the judge’s view than these IR35 status factors was Adams’ overall appearance and conduct, which was reflective of her being in business of her own account.

“Even on the basis of ‘[HMRC’s] own figures – which are lower than those of [Ms Adams] – approximately 30% on average of Ms Adam’s gross income over the two tax years of assessment derived from engagements which were not with the BBC.”

The judgment also states: “It is therefore apparent that Ms Adams must have spent a meaningful part of her overall working time on those other engagements.”

‘Career as a provider of services’

Put another way, the ex-journalist’s BBC work ”did not occur in isolation,” the judge said, rather it was part of her “overall professional career…as an independent provider of services.”

Also a contributor to national media titles, Ms Kelly was likewise found to characteristics of being an autonomous business, not just because she decided her own hours; could refuse to interview guests if it was inconvenient for her, and chose when to overrun segments or cut them short.

Rather, her variety of clients -- as a bonafide business would have -- were the key. The judge said: “[The] considerable and varied activities of Ms Kelly is [such] that she cannot be considered to be part and parcel of ITV Breakfast.

“In our view ITV was not employing a ‘servant’ but rather purchasing a product, namely the brand and individual personality of Lorraine.”

‘Not in CEST at all’

Despite the importance that the judges in both the Kelly and Adams cases ascribed to ‘being in business of one’s account,’ the IR35 tool which HMRC has developed to let freelancers and their clients ascertain IR35 status fails to even test for the factor.

“Adams was found to be in business on own account – [an IR35] status indicator…[not] featured in CEST at all,” says Chris Leslie, boss of Tax Networks Ltd. “When considering [inside or outside IR35], the thrust of the [judge’s] decision [in the Adams case] was the ‘business on own account’ test which is not present in CEST and therefore exposes HMRC”.

 

3rd May 2019

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