In July last year we wrote an article about drafting consultancy agreements in which we touched upon the forthcoming changes to the IR35 legislation.
We’re sure in July last year these changes seemed a long way off but 6 April 2020 is now not far away. In case you needed another reminder on how important it is to get IR35 ready, here’s an article on the recent decision in the Eamonn Holmes tax case. Most of us know who Eamonn Holmes is, but you may not know why he is famous from a tax perspective!
If you’re unsure what the changes to the IR35 legislation are, click here to view the previous article.
Eamonn Holmes has worked for ITV for many years. He has worked on a self-employed basis through a personal service company called Red, White and Green Limited. The key point from an IR35 perspective is therefore whether or not Eamonn was genuinely self-employed for tax purposes or whether his relationship with ITV was, in reality, one of employment.
The relevant contract between ITV and Eamonn’s company:
- required him to be available for the work (as you would expect, he couldn’t send someone else to present on his behalf!)
- required him to accept a minimum amount of work
- gave ITV complete editorial control
- restricted Eamonn’s ability to work elsewhere and
- ensured he got paid even if a programme was cancelled
The First-tier Tax Tribunal found that the working reality of the relationship was one of employment, not self-employment. This meant that Red, White and Green Limited should have been deducting income tax at source. As the changes to IR35 have not yet come into force, the sizeable outstanding tax bill is the responsibility of Red, White and Green Limited but, had this happened post 6 April 2020, this liability would almost definitely have rested with ITV, as the end-user.
Whilst not all cases will be as high profile as this one, this case is nevertheless a useful reminder that businesses need to be ready for the April changes. If there is anyone in your workforce who is engaged via a Personal Service Company (PSC) but who would really be an employee if you engaged them directly, then please get in touch now to discuss your options to discuss your options for post 6 April 2020. If you are satisfied that those you engage via PSCs are genuinely self-employed, then you need to get your status determinations ready now.