What the big message behind Big Bad Wolff’s defeat really is

If contractors can get their paws on the judgment of the latest TV personality to go to tax court, they might scratch their heads a bit because Big Bad Wolff V HMRC isn’t a straightforward IR35 case. Exclusively for ContractorUK, Kate Cottrell of status advisory Bauer & Cottrell, takes a look.

Rather than being a standard IR35 appeal, the case of Robert Glenister and his PSC against the Revenue, is one of statutory construction, concerning the interaction between the NIC Categorisation regulations and the IR35 regulations.

But a key issue in the case is that the NIC Categorisation regs were repealed in 2014, so the court was dealing with a period of some 10 years prior to 2014, and a liability of some £147k.

Generally, as an actor Robert Glenister, best-known today for starring in the BBC’s Hustle and Spooks, would have been treated as a self-employed earner. Things changed for actors and entertainers for NIC purposes in 1978, with the NIC Categorisation regulations.

In cases where there was a payment of salary (as there was in the Glenister case), as part of the monies paid for the services, it meant that Mr Glenister was treated as being an employed earner. The result of this was that Glenister was liable for the Employee’s NIC, and his producer (i.e. the person producing the entertainment production he was in) was liable for the secondary (Employer’s) NIC.  

By having a limited company -- Big Bad Wolff Ltd -- all monies were paid to this PSC, and consequently less NIC had been payable. We then have the advent of the IR35 rules of 2000. In essence, Glenister’s defence team claimed that IR35 should not be considered and was unfair on the basis that the secondary contributor (under the Categorisation regs) would have been the producer, and not the PSC. But at this appeal, the judges agreed with the FTT and found for HMRC again. In short, it was found that you have to comply with all the rules -- be they special NIC ones or IR35 and Mr Glenister was subject to both.  

The summary in the judgment makes it clear:

The Company’s position is that whole categories of taxpayers (covered by the Categorisation Regulations) should be exempted from that principle. In effect, it is asserted that entertainers, who may have achieved considerable commercial success (and other taxpayers covered by the Categorisation Regulations such as lecturers and teachers) should enjoy the special privilege of being able to avoid  NIC by contracting through personal service companies rather than directly.

But unfortunately for Glenister, “the Company has not shown us any provision explaining why entertainers (or teachers and lecturers) should enjoy any such special privilege; nor has it provided any reasons why they should. The FTT was, in our view, correct in its purposive analysis.”

The initial FTT case states that this was a ‘test case’ with others stacked up behind, which may be why a further appeal was made. The big message here is to ensure that you -- or those you seek advice from -- are aware of all the regulations that may affect you, and especially those that provide that you are automatically caught by IR35. Otherwise, like Big Bad Wolff was, expect to be bitten.