Sporting celebrities at a loss in the status stakes
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
18 September 2020
Justine Riccomini provides an overview of two recently published decisions on IR35 from the Upper Tribunal and employment status from the Employment Appeal Tribunal where the two taxpayers wanted opposite outcomes, and both lost.
A more detailed summary of both cases can be found in the ICAS Technical Bulletin for subscribers.
Case 1 - Kickabout is within IR35 - Background
ICAS reported last year on the FTT case of Paul Hawksbee T/A Kickabout Productions Ltd v HMRC, which is an IR35 case concerning itself with a Talksport Radio presenter and whether his contract was a deemed employment contract through his intermediary company. In the First Tier Tribunal, the Judge and the lay member came to conflicting decisions, but as the Judge has the casting vote, the decision was made in Mr Hawksbee’s favour that IR35 did not apply.
Given the split decision, HMRC saw no reason not to appeal the case and the latest Upper Tribunal decision is the result of that appeal. Unfortunately for Mr Hawksbee, the UT reversed the FTT decision and decided that IR35 did in fact apply to the circumstances.
MOO prevails again
Even though Mr Hawksbee had carried out the same work for Talksport Radio for 18 years by the time the case reached the FTT, the contracts examined covered the years 2012-13, 2013-14 and 2014-15.
The two contracts in existence during this time period contained different provisions about Mutuality of Obligation (MOO) – the first contained no written provisions and the second denied its existence.
The UT found that MOO not only existed based on the facts of the case but that it without question pointed towards an employment relationship due to the existence of a hypothetical contract of employment. Yet HMRC continues to ignore the concept in its Check Employment Status for Tax (CEST) Tool.
When, where, how?
The UT found the radio station could control what, when and where the tasks in question were performed – even though Mr Hawksbee had discretion as to ‘how’ he performed those tasks. Naturally this was found to constitute sufficient control for an employment relationship to exist in addition to the MOO factors above.
Personal service
HMRC were able to show that Mr Hawksbee was contractually prohibited from providing a substitute and had to undertake his work exclusively for Talksport radio.
Not in business
The above factors trumped the evidence given which pointed towards self-employment, such as the lack of entitlements to statutory pay, leave, training or medicals, the fixed fee arrangements and not being considered ‘part and parcel’ of the organisation.
Summary
It is important to note that the method used to decide the case outcome differed slightly from the holistic overview methodology as set down in Hall v Lorimer [1994] STC 23 which has been the common approach used ever since in status cases. In this case however, a strict order was maintained, in that the first priority was to examine MOO, followed by control and then everything else.
If HMRC considers this mechanical approach to now override the principles set down in Hall v Lorimer, the department may finally have to admit that the CEST Tool must also consider MOO as a matter of course.
Case 2 - Varnish is not an employee or worker – Background
Jess Varnish, Former Great Britain Cyclist who lost her original case against the British Cycling Federation (BCF) and UK Sport at the Employment Tribunal (ET) in 2019 has now also lost the Employment Appeal Tribunal (EAT) case she brought against the sporting body.
Ms Varnish’s “Athlete Agreement” was terminated by the BCF just prior to the 2016 Olympics on account of performance-related issues. Her claim to the ET centred around unfair dismissal and unlawful detriment due to her having made protected disclosures under the Employment Rights Act 1996 (ERA), and direct sex discrimination and victimisation under the Equality Act 2010 (EqA).
The ET decided her claim for unfair dismissal under ERA 1996 was invalid because her relationship with British Cycling and UK Sport (or both bodies jointly under a tripartite arrangement) was neither one of an employee nor a worker (for the protected disclosures element). The main reason for this was that Varnish was not, in their view, personally performing work for remuneration (the EqA element).
The Ready Mixed Concrete case provided the normative initial starting point for establishing MOO.
Missing MOO
The basis of the contractual terms was examined and the following facts considered:
- Varnish has applied to and won Lottery funding via UK Sport to support her Athlete Agreement. No funding was provided by British Cycling or UK Sport.
- The sum payable to Varnish was characterised as a grant based on assessment of future potential
- Varnish had not agreed to provide work but had instead agreed to train, with the ultimate aim of “achieving success in international competition”
- MOO was found to be absent from the contractual terms due to the above points, and notably, the tests for control and personal service did not need to be established because the “irreducible minimum” element of MOO was absent.
Unlike in Kickabout, the EAT applied the overview test in Hall v Lorimer and concluded that the overall situation did not paint a picture of a contract of employment. The claim that Varnish was a worker also failed due to the fact that there was no “work” which Varnish had been obliged to personally perform.
Precedent?
It remains to be seen whether Varnish will be able to build a case for errors of judgement by the EAT which will allow her to seek permission to appeal to the Court of Appeal.
Do you have any thoughts? Send us an email on tax@icas.com or start a discussion on CA Connect, the ICAS members’ forum.