It was announced late yesterday that television presenter Lorraine Kelly had won an IR35 battle with HMRC, worth £1.2million. HMRC felt Lorraine was effectively employed by ITV, and that her company was hiding that fact by claiming that she was a freelancer. The £1.2million was the bill in unpaid tax and national insurance that Lorraine would have faced if that claim had been upheld.

IR35 Legislation states that a worker can be classed as an employee even if they are not on the payroll, and is intended to reduce tax avoidance. These workers are then subject to the same tax deductions as employees.

Lorraine Kelly’s defence hinged around the control that she maintains of her appearances and the flexibility she enjoys. Her ability to endorse brands, choose the jobs that she accepts and take time off from her daytime show if she chooses all contributed to that.

HMRC have been dealt several such blows in recent months, with this been the fourth of five IR35 cases HMRC have lost since 2018.

There are two primary areas of concern here:

1. The ever increasing urgency from HMRC to recover additional tax is prompting cases where there is no justification. The tax payer is therefore subjected to unnecessary stress and worry in defending their position.
2. There are planned changed to IR35 regulations in April 2020, where HMRC will require businesses to interpret the complex rules. Given that HMRC seem incapable of doing so accurately, it seems a stretch to expect businesses to do so.

Unsure of where you stand?

As mentioned above, Lorraine Kelly won her case because she was able to prove control rested with her, rather than with ITV. This is a major consideration when working for anyone as a consultant. Other areas to consider around IR35 are:

1. Who owns any equipment you use?
2. Where are you required to work?
3. When do you have to do the work? Can you choose your own hours?
4. Can you choose to substitute someone else to do the work, or is it only you who can do so?
5. Are you free to work for other businesses at the same time?
6. Do you receive any payments for pension, holiday or sickness?

IR35 regulations are complex, as HMRC have shown! We can give you some guidance, but also refer you to experts who can review your contracts to give you peace of mind, so please do get in touch.

As you can see from the amounts above, making mistakes in this area can be expensive! 

Should HMRC ask any awkward questions, all clients of ours are automatically included in our Fee Protection Scheme. This covers our costs in defending any potential enquiry, reducing sleepless nights and time spent away from your business. The scheme includes our costs for preparing for and attending meetings, which can often stop matters developing.

Do get in touch if you have any questions on this or any other HMRC related matter.

 

 

You can read more about this case here.