Eamonn Holmes’ £2million IR35 case to hinge on Control

Warnings are hitting HMRC in light of its decision to take TV presenter Eammon Holmes to court over IR35 -- a decision which could cost him £2million.

The large amount of tax at stake -- £2million is an estimate based on Holmes’ reported pay -- is behind HMRC’s move to have appointed a barrister, ContractorUK understands.

Described by an IR35 expert who is ex-HMRC as “expensive and unfair,” the Revenue’s usage of a barrister to fight IR35 cases first raised eyebrows in the Christa Ackroyd appeal.

Yet HMRC lawyered up again on IR35 a month later to fight (and lose to) Jensal Software Ltd, only to do the same -- fight with a barrister but lose --  in November against MDCM Ltd.  

Explanations have ranged from the Revenue’s own Solicitors Office and Legal Services arm being overstretched, to the department believing a QC would increase its chances of victory.

'Control'

With the Holmes case, the large amount of tax at stake, and the PR implications of what an IR35 win against a celebrity would mean, are more likely behind HMRC’s motivation to appoint a QC.

But the ruling in an IR35 case against another well-known TV personality, BBC World host Joana Gosling, is imminent and -- like the Holmes case -- Control will be the deciding factor.

However last night, a status advisory was unmoved by the disclosure – made to ContractorUK by a veteran chartered accountant familiar with the cases.

“Media presenters are engaged for their Personal Service, so Control will be highly significant,” said the advisory Qdos. “Just as it was in the Christa Ackroyd case.”

'HMRC mistakes'

The advisory was more exercised about HMRC and how it should “tread” when investigating the status of presenters at ITV, if its scrutiny extends beyond Holmes -- “carefully”, it specified.

“While the details of Mr Holmes’ contract have not yet been disclosed, it’s important HMRC learns from the apparent mistakes it made when investigating BBC presenters”, said Qdos’ Seb Maley.

“[Then]; it was reportedly the broadcaster that encouraged these workers into operating through their own limited company and it was not necessarily the individual’s choice.”

As well as ‘encouraged,’ BBC presenters have used the words ‘bullied,’ ‘compelled’ and ‘coerced’ to describe how the BBC behaved towards them to ensure they used PSCs.

'Vital'

The BBC bearing some responsibility, morally, and fiscally (such as it helping towards presenters’ IR35 bills), is a point that both experts and MPs have raised, but which the BBC has ducked.

“It’s vital HMRC goes about this case and others in the right way, and assesses the unique aspects of Mr Holmes’ and any other presenters’ working arrangements,” Mr Maley said.

“The taxman cannot simply assume that one presenter’s status sets a precedent for every contractor engaged by ITV.”

'Outdated'

The Freelancer and Contractor Services Association (FCSA) also warned HMRC against swallowing Mr Holmes’ reported claims (“I am the test case”), whole.

“It is essential that HMRC does not penalise everyone working through PSCs in a blanket fashion” the association said.

“They bring much-needed flexibility to both the freelancer and businesses that engage them on a short-term basis, just as the Lords Select Committee [has] stated”.

The FCSA added that all the recent IR35 cases highlight employment status to be far too “complex”, and urged the government to address IR35 – “outdated legislation”, urgently.