Freelancer group, IPSE, claimed that this case showed that HMRC was ‘completely in the dark’ about its own IR35 legislation.
Lorraine Kelly successfully appealed against an HMRC tax bill of £900,000 and £300,000 in National Insurance contributions, for her work at ITV Breakfast between September 2012 and July 2017.
From 2012, she was contracted to present Daybreak and her own show through the company she runs with her husband. But HMRC argued she was effectively an employee of ITV.
In a ruling by the first-tier tax tribunal, the Judge concluded the relationship between Kelly and ITV 'was a contract for services and not that of employer and employee'.
Judge Jennifer Dean sided with Kelly after she launched an appeal claiming she should be treated as a 'self-employed star', and also said Ms Kelly can be described as a 'theatrical artist', meaning payments to an agent were allowed as a tax-deductible expense.
The Judge ruled: “We did not accept that Ms Kelly simply appeared as herself – we were satisfied that Ms Kelly presents a persona of herself, she presents herself as a brand and that is the brand ITV sought when engaging her.
“All parts of the show are a performance, the act being to perform the role of a friendly, chatty and fun personality.
“Quite simply put, the programmes are entertaining, Ms Kelly is entertaining and the ‘DNA’ referred to is the personality, performance, the ‘Lorraine Kelly’ brand that is brought to the programmes.”
She added: “We should make clear we do not doubt that Ms Kelly is an entertaining lady but the point is that for the time Ms Kelly is contracted to perform live on air she is public ‘Lorraine Kelly’.
“She may not like the guest she interviews, she may not like the food she eats, she may not like the film she viewed but that is where the performance lies.”
The tribunal found Lorraine Kelly was free to carry out other work and activities and did not enjoy employee benefits such as sick pay and holiday pay.
A HMRC spokesman said it was 'disappointed' with the ruling, and that it would be 'carefully consider the outcome of the tribunal before deciding whether to appeal'
Several well-known television presenters and personalities were targeted by HMRC after a high profile publicity campaign focused on whether BBC and ITV presenters were freelancers or employees.
The furore resulted in the introduction of a much-criticised clamp-down on the way public sector - and soon to be private sector - assess their relationship with freelancers.
IPSE - 'HMRC in the dark'
Andy Chamberlain, IPSE’s Deputy Director of Policy, said: “What this judgement hammers home irrefutably is that HMRC are completely in the dark about their own tax legislation.
“Lorraine Kelly’s case is the fourth of five IR35 cases that HMRC have lost since 2018. It is now clear that they have wrongly been hounding many BBC and ITV presenters over a tax law they do not understand themselves.
“The Government, however, has said that from April 2020, private businesses across the UK will have to determine the IR35 status of their contractors.
“This judgement should be a wake-up call to government that it cannot expect businesses to understand a tax law that it cannot even implement itself.”
Qdos - Unfairly
Seb Maley, from tax specialists Qdos, said: “HMRC unfairly pursuing genuine freelancers and contractors for what it believes is missing tax has become an all too familiar story. Ms Kelly is the latest freelancer in a long line of individuals who have been placed under unnecessary emotional and financial stress as a result of HMRC’s desperation to raise tax revenues.
“This is a particularly high profile case and shines a very unfavourable light on HMRC, that clearly has trouble interpreting the very legislation it created, attempts to enforce and insists on reforming.
“Having successfully shut down two IR35 enquiries this year already, we’re well aware that HMRC is unpredictable and willing to investigate freelancers and contractors who are clearly abiding by the rules.”
FCSA - Complexity
Julia Kermode, from Ttrade group, the Freelancer and Contractor Services Association (FCSA), said: “Lorraine Kelly is one more star working on a freelance basis who has hit the headlines and the story once again serves to highlight the complexity of IR35 legislation.
"Individuals choosing to be self-employed are in a very different position of security to someone who is a permanent employee with all the accompanying statutory rights and benefits. We dispute that personal service companies (PSCs) are a mechanism to avoid tax, they are a perfectly legitimate way of someone being in business on their own account.
"It is essential that HMRC does not penalise everyone working through PSCs in a blanket fashion as they bring much-needed flexibility to both the freelancer and businesses that engage them on a short-term basis. HMRC need to stop treating people that choose to work through personal service companies as serial tax avoiders because their record of IR35 cases clearly shows that this is simply not the case, and the majority are working legitimately for themselves.”
For more information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2019