News & Events
The recent decision in the case of Albatel Limited vs HMRC is the latest in a long line of personal service company tax cases where HMRC has tried to apply the IR35 rules to determine the employment status of high profile presenters.
Albatel provided the services of TV star Lorraine Kelly to present a daytime programme on ITV. HMRC argued that these services fell within the IR35 rules, on the basis that if the contract had been directly between Ms Kelly and ITV it would have been a contract of service, with Ms Kelly being an employee. Therefore, the fees paid by ITV to Albatel should be taxed as employment income, and the assessments for PAYE and NIC were raised. Albatel appealed against these assessments.
The Tax Tribunal looked at the hypothetical contract that could exist between Ms Kelly and ITV, had it not been for the existence of Albatel as an intermediary. As in previous cases, key to the Tribunal’s decision was examining the level of control exercised by ITV over Ms Kelly’s work, and whether there was any mutuality of obligation between the parties.
The Tribunal concluded that the control fell below that which would be exercised over an employee. In addition, ITV was not obliged to call on Ms Kelly’s services and there were examples of when she had refused work. The contract was therefore one for services and not that of an employee. This is in contrast to last year’s Christa Ackroyd Media Limited case, where it was found that the relationship was a contract of service.
The headline grabbing aspect of the case is the Tribunal found that Ms Kelly was considered a “theatrical artist” and so allowed her agent’s fees to be tax deductible. Although specific to this case, it serves as a reminder that there is a different allowable expenses regime for the employed and the self-employed.
Currently the IR35 rules as they apply to workers in the private sector are undergoing consultation, with the aim of making the tax and NIC payments the responsibility of the contracting organisation (and not the personal services company as it is currently), to take effect from 2020. This will be for those workers who are deemed to be employees; the genuinely self-employed will not be caught.
The issue highlighted by all of these cases is that of deciding with certainty if a worker is genuinely self-employed, and the need to take specialist advice.