This case concerned the tax arrangements of Paul Hawskbee, a radio presenter on Talksport Radio.  He has been co-presenting the daily afternoon slot for 18 years.  The arrangement between Hawskbee and Talksport can be described as follows.   Hawksbee had a personal service company, that being the respondent, which had contracted with Talksport in relation to his services.   The purpose of the arrangement was to ensure that the income was received through the personal service company rather than the income tax and national insurance that would be accrued by being an employee.

HMRC focused on the tax years 2012-13 and 13-14 where Hawskbee had received 90% of this total income through the arrangement with Talksport and they assessed that £140,000 was owed in income tax and national insurance as IR35 (Section 49 of the Income Tax (Earnings and Pensions) Act 2003) applied to him.  This operates on the basis that there is an intermediary that operates between the worker and the client but for it the worker would have been regarded as an employee.  When that occurs then HMRC can seek to recoup the tax and national insurance that had been avoided.

At first instance, the Tax Tribunal found in favour of Hawksbee/Kickabout Productions, but this was appealed by HMRC.  On appeal the issue of ‘hypothetical contracts’ that may have been between Talksport and Hawskbee were considered.    These contracts were considered on the basis of the substance of the contract between Talksport and Kickabout.    It was held that there was a mutuality of obligation and that Talksport had control over the work that was carried out by Hawksbee.  Furthermore, Hawksbee had economic dependency on Talksport considering he had been presenting the show for 18 years.   The extent of this control was exemplified by the fact Hawksbee had to be available for 222 days per year and that Talksport would be prioritised over other work.   Indeed, in terms of other work he could not work for another UK radio broadcaster.

The Tribunal examined the arrangement made by Kickabout stating that it was contrary to business common sense as it unduly restricted the earning capacity of Hawksbee if Talksport were to stop providing work.  The Upper Tribunal found that there was a level of control that would be that seen with an employment situation.  The reason they came to a different view than the First Instance Tribunal was that they stated the hypothetical contract being of two years duration with four months’ notice was neutral whereas the Upper Tribunal stated it was an indicator of employment status and the degree of control exerted by Talksport.

Practical Lessons

The workings of IR35 legislation are thankfully becoming clearer with every case that is decided on the issue.  However, with the clarity comes an uncertain financial position for those who have been operating under personal service contracts for the purpose of financial gain.  With public purse strings likely to be significantly stretched there could be a push towards greater enforcement and individuals should be mindful of IR35 in arranging their personal tax affairs.
https://assets.publishing.service.gov.uk/media/5f1fe3cdd3bf7f596b135af1/HMRC_v_Kickabout.pdf