What is IR35, and why does the private sector need to know?
Ian Kelly’s ‘Taxing Thoughts’ – November 2019
With the expansion of off-payroll working (IR35) from the public sector into the private sector from April 2020, a recent case found in favour of HMRC in respect of three BBC presenters is a timely reminder of when things can go wrong.
It’s maybe a good idea to start with a refresher as to what IR35 is.
In its simplest form it is the legislation designed to ‘catch’ workers who receive payment from an end client via an intermediary, typically their own limited company, which, had the worker been paid directly by the end client, would have been on employment terms.
From April 2020, all public and private sector bodies that meet two or more of the following conditions will be responsible for deciding the employment status of the worker for every contract:
- Annual turnover of more than £10.2 million
- Balance sheet total of more than £5.1 million
- More than 50 employees
There is a simplified turnover (of more than £10.2 million) test covering a body that isn’t a company, a limited liability partnership, an unregistered company or an overseas company.
The three presenters, Joanna Gosling, Tim Willcox and David Eades, lost their case before tribunal and found themselves ruled as being subject to IR35 and yet without the benefit of any employment rights.
The three had all previously worked as BBC employees but had been advised that they would only be given future work if they worked through their own limited companies.
Despite the fact that the Tribunal acknowledged that they had no guarantee of having their contracts renewed; work could be declined or a substitute provided; no control or supervision about how to work (although editorial guidelines would be provided); no holiday pay, sick pay or pension and were free to undertake work elsewhere- in other words there were similarities with the acknowledged employment status cases-Ready Mixed Concrete; Market Investigations Ltd and Hall v Lorimer-the decision went against them on a split basis.
The three, therefore, face huge HMRC bills for several tax years and which will act as a potential bombshell awaiting an alleged in excess of 100 similar BBC ‘contractors’.