HMRC IR35 victories lead to ‘confusion’

A judgement against BBC presenters in relation to their IR35 status has revealed how confusing and complex the tax regulation is, according to IPSE.

Joanna Gosling, David Eades and Tim Wilcox, presenters at the BBC, were told to pay £920,000 by the Courts after HMRC claimed that the money was owed.

Having considered the evidence for the three presenters, judges at a High Court tribunal found that the ‘imbalance of bargaining power’ at the BBC was a significant factor in the case.

They stated that ‘the BBC was in a unique position and used it to force the presenters into contracting through personal service companies and to accept reductions in pay’.

However, despite making this finding, the tribunal ordered the money to be paid following a split decision, ruling that ‘the assumed relationships were ones of employment’ as the BBC told the presenters how, where and when to work. This means that the presenters were bound by the IR35 rules even though they were forced into this position by their employer.

The BBC has said that ‘it wants to help presenters resolve any historic tax issues they face because of the way their employment status is now being assessed’.

Andy Chamberlain, from freelancer trade body, IPSE, said: “That this case has taken eight years and ended up with an uncertain split decision shows how confusing and unfit for purpose IR35 is.

“We will look at the judgement in detail but the uncertainty in the decision is likely to add to the chaos around this legislation. Recently, HMRC has lost the majority of these cases. There is little evidence that they or other experienced tax specialists are confident in how it works.

“We remain at a loss how the Treasury expects medium-sized businesses to accurately apply IR35 to their contractors from next year when HMRC and tax judges struggle.

“These BBC cases are high profile but not typical of IR35 issues. Most involve freelancers and contractors working on innovation and productivity projects. Burdening business with the complexity of IR35 only damages the UK economy and the overall tax take. Instead, the Treasury should focus on reforming our telegram-era tax code to be fit for the broadband age.”