IR35: Football commentator on broadcaster’s teamsheet

In light of a recently published Tax Tribunal decision, the purpose of this article is to remind clients of their potential obligations under the United Kingdom’s off-payroll working rules. Such rules are typically referred to as “IR35”.

While the case in question related to years prior to April 6, 2021, from which date the responsibility for considering and potentially applying the off-payroll working rules changed for some, the factors determining employment tax status remain relevant today.

So, let’s kick-off (and then agree to end the football puns here).

The decision

A well-known football commentator (“AP”) was providing his (primarily football commentary) services to BSkyB.

As is customary (or at least was historically) AP provided his services through an intermediary (the “Company”). AP owned circa 75% of the shares in the Company, which, incidentally, has since applied to be dissolved.

Pursuant to the Company’s contract with BSkyB:

• AP had to be available to work, and only if he was not available would another presenter be acceptable
• the Company had the right to provide a substitute (no pun intended), but (i) the Company had to use AP to provide such services in the first instance and (ii) it was never necessary to provide a replacement
• AP was unscripted and therefore had license to apply his own judgment during commentary.

However, based on facts including that:

• the producer had significant control of the programme e.g., dictating when AP should start and finish commentary as well as providing scores from other matches
• BSkyB had ultimate responsibility for each programme
• AP was seen/perceived to be (presumably by viewers) as “part and parcel” of BSkyB’s organisation
• AP rarely took on any other assignments for competitive media

the tribunal ruled that the mutuality of obligation and control (i.e., the what, how, when and where) tests respectively were satisfied. The terms of the contracts (between the Company and BSkyB) were therefore held to be consistent with an employment relationship, rather than contractor status. As a result, the IR35 rules applied (meaning that the Company was responsible for calculating a deemed payment (to AP) that should have been subject to UK employment taxes and National Insurance contributions (“NICs”)). In AP’s case, the taxes and NICs now due are reported to be circa £350,000.

What changed from April 2021?

Originally intended to come into effect in April 2020, but delayed due to the SARS-CoV-2 pandemic, medium and large, private sector organisations became responsible for status determinations in respect of individuals provided by intermediaries (such as the Company).

If the result of the engaging organisation’s analysis (and after any appeal process launched by the worker concludes) is that the individual is a deemed employee/under a contract of service then the payer has to:

• deduct income tax and NICs through the payroll
• pay employer’s NICs
• pay any apprenticeship levy.

What didn’t change from April 2021?

Other articles we have seen can create the impression that small entities are somehow exempt from the IR35 rules. This is not correct.

What is correct is that small, private sector organisations (in the capacity of the client i.e., indirectly engaging a worker) are not responsible for assessing an individual’s tax status under the off-payroll working/IR35 rules. That status determination responsibility remains with the intermediary, as it did in the years under dispute in the AP case. IR35 still needs to be considered though, it is simply a question of by whom.

Who’s small?

A private sector client is always classed as small during its first year of business. Subsequently, the client organisation will retain this status provided it falls below two (or more) of three thresholds over two consecutive financial years:

• annual turnover of not more than £10.2 million
• balance sheet total of not more than £5.1 million
• not more than 50 employees (on average).

The relevant data is taken from the:

A. most recent year for which the financial statements’ filing date falls before the beginning of the UK tax year and

B. financial year before that determined under A.

If two of the three small thresholds are no longer satisfied, the private sector client organisation must determine its indirect worker’s(s’) status (and, depending on the outcome, operate payroll on the worker(s)) from the start of the UK tax year following the filing date for the year described in A above. 

What action need I take now?

Given the changes, moving the employment tax status determination responsibility in certain circumstances, came into effect from April 6, 2021, clients will have long ago completed their reviews of indirect workers engaged at that date.

This article therefore seeks to serve as a reminder of the:

• need for medium and large private sector organisations to determine the status of indirect workers engaged in future
• tests to be applied when doing so.

As noted in the AP case, and with reference to the tests to be applied, employment tax status determinations are a function of considering various factors. These can include:

• control
• personal service
• equipment
• financial risk
• basis of payment
• mutuality of obligation
• holiday pay, sick pay and pension rights
• part and parcel of the organisation
• right to terminate a contract
• opportunity to profit from sound management
• personal factors
• length of engagement
• intention of the parties

In terms of the relative weighting of each factor, prior case law has held that:

“control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor”. 

In HMRC’s words:

“It must be emphasised that status in not a matter to be determined by running down…[a] … check list or adding up the number of factors pointing toward employment and comparing that result with the number pointing toward self-employment. It is a matter of evaluating the overall picture that emerges from a detailed review of all the facts.” 

Contact us

If you have any queries in respect of this article, or how Centralis can help with matters such as status determination or ongoing payroll, for example, then please do not hesitate to get in touch.