In the latest development of the controversial Off-payroll rules, HMRC have challenged the employment status of popular ITV presenter Lorraine Kelly, only to face a crushing defeat. The case saw Kelly, a presenter of TV chat shows for some 25 years, appeal against the tax authority for a retrospective tax bill she received. Kelly, who works through her own PSC, signed a contract to present her shows Lorraine and Daybreak in 2012. Four years later, she was sent a bill of nearly £900,000 in income tax and more than £300,000 in national insurance contributions.
In a case that closely resembled HMRC’s reassessment of many BBC presenters as ‘employees’, the tax authority deemed that Kelly wasn’t in business on her own account, as she provided a contract of service that could not be fulfilled by someone else. In an interesting development of the rules in this area, Judge Jennifer Dean overruled HMRC’s decision on the grounds that Kelly was a performance artist. She stated that the presenter had clearly created a brand or ‘persona’ to present the show, rather than presenting it as herself.
The judge said that Kelly could be classed as a “theatrical artist”, which would mean any payments to an agent would be allowed as a tax-deductible expense. Not only this, the tribunal found that Kelly did not receive staff benefits such as holiday or sick pay and was allowed to carry out other work. Judge Dean ruled that “the level of control falls substantially below the sufficient degree required to demonstrate a contract of service and we are satisfied that the factors strongly indicate that the contract was one for services.”
This is the fourth case that HMRC has lost out of the five that have come to light in the last year, which clearly indicates the legislation is not clear cut and is open to interpretation on a case by case basis. Earlier this year, BBC director general Tony Hall apologised to the presenters affected, raising the issue of HMRC’s notoriously unreliable self-assessment tool, CEST. Despite a recent consultation document on the Off-payroll rules, HMRC are still intending to roll out IR35 reforms to the private sector in April 2020.