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Winning IR35 Scrum for Sky rugby pundit Stuart Barnes
Julian Ball | Legal Director
Friday 27th Jan, 2023
With tax and NICs of nearly £700k at stake for former England fly-half Stuart Barnes at a recent First Tier Tribunal (FTT) hearing, the erstwhile rugby pundit overcame HMRC’s latest IR35 challenge to former sportspersons taking a punditry route to earning a living post-retirement.
HMRC made six determinations covering the tax years 2013/14 to 2018/19 on Mr Barnes’ personal service company S&L Barnes Limited. On appeal the judge had to consider whether the intermediaries’ legislation (IR35) applied. Mr Barnes’ PSC provided his personal services, sought after following his career as former player and captain in the sport of rugby union, to several media outlets including The Times, Sunday Times, Rugby World magazine and broadcasters in Ireland and Australia as well as Sky TV in the UK.
His profile in the rugby world made him an ideal candidate for the role of Sky TVs ‘in game’ analyst supporting the match commentator. His limited company duly signed service agreements beginning in 2013. This work for Sky constituted around 60% of S&L Barnes Ltd’s income for the 6-year period up to 2018/19.
Was there MOO, Control or a prima facie employment relationship?
Judge Heidi Poon’s first task was to consider the existence and nature of the ‘hypothetical contract’, between Stuart Barnes and Sky TV. Did the evidence of the existing contract and details of the working arrangements, indicate that the relationship between the parties was one of employer/employee?
Using the three tests in the famous Ready Mixed Concrete (RMC) case she concluded, firstly, that there was a mutuality of obligation between the parties. This had not been disputed by Mr Barnes’ team. The judge then deliberated at length on the second RMC test, whether there was ‘control to a sufficient degree as would exist in an employment’. Despite Mr Barnes undoubted autonomous, expert input into the commentary she found that the cumulative effect of the contractual terms and the circumstances of the relationship between the parties indicated a framework of control by Sky TV. The final RMC test was then applied - whether there was a prima facie employment relationship or whether there were factors demonstrating that the person providing the service through a PSC was arguably in business on his own account.
In concluding that this test was not satisfied, Judge Poon made reference to the Court of Appeal judgement in the recently determined case of TV presenter Kaye Adams’ and her PSC, Atholl House. Applying some of the higher Court’s reasoning in that case she explained that:
Although Mr Barnes had previously worked for Sky (since 1994) as a co-presenter his role was different in later years in that he provided game, team and tactical analysis and his work must be distinguished from that of the Sky match presenter who was an employee.
His work for The Times and others in post-match analysis was not restricted by his work for Sky TV. Although he gave opinions during the Sky broadcasts of matches, he was at liberty to repeat them in his newspaper column.
Mr Barnes was not financially dependant on his Sky work which was demonstrated when he was subsequently offered lower- level reporting work by them which he declined.
Every time he appeared on air for Sky TV there was a reputational risk, an argument used by TV presenter Adrian Chiles in his successful defence against HMRC in another recent case (Basic Broadcasting Ltd v HMRC) previously reported on.
Giving due weight to the outcome of the employment tests albeit with once again very particular circumstances, Judge Poon found for the taxpayer.
Is having more than one client enough?
In terms of conclusions which can be drawn from this case well, certainly there was nothing groundbreaking. The common consensus is that HMRC should not have taken the case. Although the existence of other work added to the argument for being ‘in business on his own account’, contractors shouldn’t necessarily believe that having more than one client is necessarily an antidote to being caught in the IR35 trap.
In the context of the IR35 rules, in common with many tax cases we have seen in the media industry over the past few years, the key factors of a very special expertise or unique brand allied with a track record of being in business on your own account seems to hold sway. As is normal in these cases, HMRC reserved their position and although it seems unlikely, we may yet see the arguments re-visited in a higher Court.