Red, White and Green Limited vs HMRC (2020)

Well-known television presenter Eamonn Holmes faces a £250,000 tax bill after losing his case against HMRC.

IR35 is a complex area of employment law, the boundaries of which are set by legal cases such as this one. Until this April, it has been the responsibility of contractors to determine their employment status for tax purposes, but this is not a straightforward task and there are a number of rules that can be applied. While some cases are quite quick to establish, around a quarter of contracts fall into a grey area which only trained legal experts are able to clarify, based on previous case history such as this.

In this case, the Tribunal considered all the usual employment status factors and concluded there was sufficient mutuality of obligations and at least a sufficient framework of control to place the assumed relationship between ITV and Mr Holmes as one of an employer, rather than someone who is self-employment.

It is interesting that the Tribunal recognised that whilst there is some flexibility in how the mutuality of obligations and control tests can be interpreted, it is more difficult to apply flexibility in the test regarding personal service. It was clear that it had to be Mr Holmes who was provided by his company to undertake the services and that his participation in the contract was integral to the programme. This was evidenced by the contract giving ITV the right to terminate the contract if Mr Holmes was unable to personally deliver the services. This is a polar opposite to the usual substitution clauses which we are used to seeing in a typical “IR35” friendly contract.

It is also interesting to note that it was a similar personal service point which turned the case of Lorraine Kelly in the taxpayer’s favour. In this case it was found that it was Lorraine’s brand and personality which ITV was purchasing, not the personal services. This was one argument which lead to an outside IR35 decision.

This case highlights the nuances of the IR35 case law and its subjective nature. It is very difficult for someone not well versed in employment status to make an accurate determination. Specialist advice is needed to get this right.