Back in March 2021, we highlighted just some of the IR35 disputes facing a handful of high profile television personalities and celebrities.
Some of them, including Lorraine Kelly and Kaye Adams, argued successfully before the Tax Tribunal that the services which they provided through their personal service companies fell outside IR35. Others, in particular Eamon Holmes, were less convincing and ended up with a large tax bill.
Factors affecting the Tribunal’s decisions in these cases centred around mutuality of obligation by both parties to the contract and the key criteria of control, including the right and reality of substitution. The so-called ‘minor tests’ including whether someone is ‘in business’ also came up in the decision-making process.
It was no surprise therefore that another similar high-profile case featuring these same issues hit the headlines in November 2021.
The unfortunate individual was former Sky Sports presenter, Dave Clark. We say unfortunate for a few reasons. Sadly, Mr Clark has been suffering from Parkinson’s Disease for a number of years which effectively ended his broadcasting career in the world of TV darts.
Added to his health problems was the Tax Tribunal decision that he/his personal service company had to pay £281,000 in tax. This tax bill arose for the years from 2013 to 2018 when the work he carried out through his company, Little Piece of Paradise Ltd, for Sky Sports in its coverage of professional darts, was found to be within IR35.
Examination of the evidence presented to the Tribunal showed that Mr Clark had not been best served by what appeared to be a template Sky Sports contract unsuited to the role which was being undertaken.
We have often stressed the importance of ensuring the contract between principal and contractor reflects the reality of the working practices and again in this case it didn’t.
A reading of the Tribunal case indicates that the defence was unable to mount sufficient argument, backed by evidence, to show that mutuality of obligation (MOO) was not present. Mr Clark was effectively, under the terms of the contract, paid a retainer whether he was required to work or not depending upon Sky’s coverage of various darts tournaments.
The Judge found that in the telling test of ‘control’, rather like the Eamon Holmes case, in reality Mr Clark had a restricted right of substitution; that the contract called for personal service and the need to follow certain rules and conditions found in employer/employee relationships.
Mr Clark’s defence argument that he met the ‘in business’ test for a variety of reasons, including preparing background notes on players at home, using his own office and equipment was brushed aside by the Tribunal who found no compelling reasons to conclude that he was self-employed.
Errors of approach, including the failure to critically examine the meaning, intent, and application of the contract against IR35 criteria and a lacklustre defence at the Tribunal cost Mr Clark dearly.
Although hindsight is said to be a wonderful thing, in Mr Clark’s case it affords contractors, agencies and end users alike, the opportunity to learn some valuable lessons in how to avoid falling into the same traps:
- Don’t use a ‘one-size fits all’ approach to contracts if you believe the role falls outside IR35;
- Ensure your proposed contract is properly reviewed by specialists in the field and engage with them to align perception to reality to be sure that the correct IR35 status determination is made;
- As contracts are rolled forward, varied or renewed, apply the same rigorous approach to their review as you did to the original;
- Make sure you retain evidence of how the contract has worked in practice. For example, if there were actual instances of substitution, document them fully.
Everyone can feel sympathy for Mr Clark in his situation. Perhaps he will appeal the decision to a higher court but for the time being he remains another high-profile IR35 win for HMRC.
