IR35: control comes at a £920,000 cost

As the April 2020 IR35 changes loom ever larger, there is a lot of attention on challenges under the current system to the tax arrangements of consultants providing work through their own personal service companies.

In our previous article about a television presenter being pursued by HMRC for tax payments, the Claimant’s arrangements with the BBC were held to be self-employment rather than an employment relationship.

However, in the recent case of Paya Limited and others v HMRC [2019], the tax tribunal has found that three presenters who were engaged by the BBC through personal service companies were employees for the purpose of tax.

Whilst the presenters had argued that they were self-employed, the tribunal ruled that the ‘assumed relationships were ones of employment’ because the BBC:

• retained creative control
• instructed the presenters on how the work was to be carried out and when
• had the right to prevent the presenters from working for any other broadcaster.

The presenters and the BBC were collectively liable for £920,000 in unpaid taxes.

It also stated that the BBC had effectively required the presenters to be engaged through personal service companies due to an “imbalance of bargaining power”. Since the judgment, the BBC has acknowledged its responsibility for the contracts, and it has said it will help the presenters resolve the cases, with two-thirds of the bill reportedly already settled.

This case could have implications for more than 100 other presenters who work under personal service companies and may now face a large tax bill.

Businesses are advised to actively prepare for the IR35 changes that will take place in April 2020 by reviewing their contracts and relationships with contractors. For more information on how to prepare for IR35 changes in advance of April 2020, get in touch with our Employment department.