Earlier this year we reported how TV’s popular Lorraine Kelly defeated HMRC at an IR35 tax tribunal, successfully appealing a £1.2m tax bill. Now Christa Ackroyd and Helen Fospero are the latest TV presenters to argue against hefty tax bills under IR35 legislation.
ITV – contractor
ITV’s Helen Fospero has successfully defeated HMRC over her £80,000 tax bill. The Tribunal Judge confirmed that, “In the period in question, Ms Fospero was engaged, through [a personal service company] in a separate business, she worked under a series of short-term engagements for ITV, she had no guarantee of further work outside those engagements and ITV had no obligation to provide any work. All of these factors point towards Ms Fospero being regarded as self-employed.”
BBC – employed
By contrast, BBC’s Christa Ackroyd was found to be an employee rather than a freelance contractor. This means that she now has to pay income tax and National Insurance contributions on her earnings during her 12-year employment at the BBC – a whopping £400,000.
Christa was employed by the BBC via personal service companies. HMRC had argued that as an employee of Christa Ackroyd Media Ltd, the company was liable for income tax and national insurance payments. But Christa argued that she was a self-employed contractor so the company had no tax liabilities in this case.
The tax tribunal that heard Christa’s appeal against HMRC’s ruling said that HMRC had never suggested that she was a “tax cheat or had acted dishonestly.” Apparently, it had been the BBC’s idea that she should work using a personal service company. The ruling Judge said that the most significant factors include the fact that “the BBC could control what work Ms Ackroyd did pursuant to the hypothetical contract. It was a seven-year contract for what was effectively a full-time job.”
HMRC was later quoted in BBC News as saying, “Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid we put things right.”
If only Christa had asked our expert team’s advice. We provide the correct guidance to contractors and put forward relevant representations if a new client asks us to take over an appeal.
What is IR35?
IR35 is a rule that applies to all contractors and freelancers who don’t fall under HMRC’s definition of being self-employed. It cracks down on workers who supply their services to clients through a third-party, such as a limited company or personal services company, but who would otherwise be classed as an employee.
The off-payroll rules are changing in April though, and medium and large business will become responsible for setting the tax status of any contract worker they use. This is to make sure anyone who technically works through their own company but is actually employed by a third party, pays the right tax.
Many people feel that HMRC doesn’t actually understand the logistics of running a business. It’s been claimed that the tax office fails to look at the person’s wider working arrangements outside of the case they’ve been presented with. This is why it’s important that, if you’re a contractor, you take good accounting advice.
If you’re unsure of your tax status – particularly if you’re a contractor, HMRC’s Check Employment Status for Tax (CEST) tool may be helpful. Or, if you haven’t got the time to bother with online tools or hopeful guesswork, our expert team will be happy to explain. Click the green button to book your free consultation.