Where Eamonn Holmes’ IR35 tribunal nearly won, but ultimately lost
Household name of the television and radio world, Eamonn Holmes, is the latest presenter to have lost a high-profile IR35 tax tribunal, with HMRC defeating his PSC, ‘Red, White and Green Limited’ (RWG) in a case carrying a reported £250,000, writes Seb Maley, CEO of Qdos Contractor.
Mutuality-Control combo
While scrutinising the contract Holmes’ firm held with ITV in the 2011/12 and 2014/15 tax years when presenting the ‘This Morning’ show, HMRC argued that a number of key IR35 factors -- namely Mutuality of Obligation and Control -- meant the engagement belonged inside IR35.
Ultimately, Judge Harriet Morgan agreed, stating she “concluded that there was sufficient mutuality and at least a sufficient framework of control to place the assumed relationship between ITV and Mr Holmes in the employment field.”
With the details of the tribunal now published, let’s drill down into specific areas of this IR35 case, which was first heard nearly 18 months ago, in June 2018.
ITV had final editorial control
Despite Holmes explaining that once he is on air he is “effectively in total control of what needs to happen”, is able to do his “own thing” and structures the show “as he likes”, the presenter did accept that ITV had final editorial control.
RWG was required to acknowledge this contractually, with the notes stating that “ITV shall have absolute discretion and control over the editorial content.”
No exclusivity, but preventions in place
In defence, Mr Holmes stated he wasn’t “beholden or exclusive” to any one broadcaster, alluding to other work his company carried out at Talksport, the BBC and other third-parties, which contributed to 28.2% of RWG’s income in 2012.
However, the contractual restrictions in place to prevent Mr Holmes from working with other clients where “conflict or reputational damage” could arise -- while not decisive in the outcome of the tribunal -- looks to have played a part in HMRC’s argument that the presenter was ultimately controlled by ITV.
Clear Mutuality
On each contract, Mr Holmes was expected to work a minimum number of days, with ITV specifying these days. If any of the shows agreed were cancelled, Mr Holmes would receive payment in full regardless of the fact that the presenter would not have worked.
In addition to showing there was a mutual obligation for ITV to provide paid work and for Mr Holmes to accept it, this again highlighted “ITV’s ultimate right of control in the performance of his (Mr Holmes’) services on this regular and consistent basis.”
Holmes provided Personal Service
The notes state that Mr Holmes’ “participation in the programme throughout the Term in the manner set out above is integral to the Programme and a material term of the agreement.”
In other words, Mr Holmes provided a Personal Service to ITV and could not send a substitute in his place to host This Morning. While this clause is often pivotal for many contractors’ IR35 status, Control and Mutuality of Obligation look to have played a bigger role in the outcome of this tribunal. Nonetheless, Judge Morgan did note that it “is clear that it was key to the arrangements that Mr Holmes was obliged personally to provide his services to ITV.”
Painted the rest of the employment picture
Also considered was that Mr Holmes was entitled to receive a number of additional “benefits”, which included the provision of a car for him to travel to and from the studio, a selection of clothing, reimbursement of “reasonable” travel and accommodation expenses along with other expenses incurred in connection the services provided. The case notes also state that Mr Holmes “accepted that ITV provided all necessary insurances.”
These aspects, in particular, paint the picture of an employment relationship. In addition to carrying relevant business insurances, outside IR35 contracts should avoid accepting so-called ‘benefits’ that an employee might be offered - whether that’s a car provided by the client or day-to-day expenses.
A delighted HMRC
With only a month or so until IR35 reform on April 6th, an IR35 victory couldn’t have come at a better time for HMRC. The tax authority will be delighted about such a high-profile scalp. But while HMRC winning this case may concern contractors, it must be taken into account that this is a rare win for the taxman, who still has an unenviable win rate in IR35 tribunals.
The fact of the matter is that Mr Holmes’ contract is unique when compared with most outside IR35 contractors who, for example, do not provide a personal service, often have a legitimate right to provide a substitute and are not controlled in the way that the presenter was.
However, that’s not to say that Mr Holmes - like many other presenters who have been investigated by HMRC recently - set out to deliberately break the rules. Even after siding with the tax office, Judge Morgan wasn’t surprised to hear that Mr Holmes left his contractual matters to others, such as his agents and accountants, “so he can focus on what really interests him, namely, his presenting and journalistic work.”
