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In the recent case of S & L Barnes Ltd v HMRC, Stuart Barnes, a former rugby player who now works as a pundit, occasional writer, and commentator, successfully appealed against HMRC’s attempt to apply IR35 rules to contracts between his limited company, S & L Barnes Ltd (S), and Sky Sports. It is important to note that the periods affected preceded the off-payroll rules.
This case followed three previous appeals involving presenters with contracts with Sky Sports, all of which had found in favor of HMRC. However, the tribunal judge in the S & L Barnes Ltd v HMRC case made a distinction between Barnes’ role as a pundit and a presenter employed by Sky.
The tribunal judge’s decision was influenced by a previous ruling in the Atholl House Ltd case, which established that it is not appropriate to consider engagements in isolation when assessing IR35 applicability. Instead, the wider context of an individual’s activities, and whether they are in business on their own account, must be taken into account when deciding if there is a hypothetical employment contract.
In the S & L Barnes Ltd v HMRC case, the judge highlighted several factors that distinguished Barnes’ situation from that of an employee of Sky. Firstly, Barnes was engaged on a retained basis, with a maximum number of days he was required to be available for work. However, Sky was under no obligation to provide work on those days. Secondly, Barnes received a fixed retainer, which was not reduced if he worked less than the agreed-upon days.
Crucially, the judge found that Barnes was “in business on his own account” and, when considering the Sky contract in the context of his wider arrangements, there was no hypothetical employment contract. As a result, the appeal was upheld.
The key takeaway from this case is that HMRC should only apply IR35 rules after considering whether the individual is in business on their account. While this factor alone may not always exempt a contractor from IR35, it can significantly impact the assessment, as demonstrated in the S & L Barnes Ltd v HMRC case.
If you need help to plan your taxes, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.