PD & MJ Ltd

The Commissioners for His Majesty's Revenue and Customs

A football pundit, providing services through a personal services company, was regarded as an employee under a hypothetical contract for the purposes of tax.

NB: This is a tax case heard in the Upper Tribunal (Tax and Chancery Chamber)

A personal services company, the appellant, appealed against a First-tier tax Tribunal decision that the IR35 legislation applied to contracts between the appellant and a broadcaster for the purposes of football punditry.  The company was incorporated in 2013 by a former footballer, Phil Thompson. He had done this for many years and in 2005 the broadcaster asked Mr Thompson to come on contract and that he could do what he wanted and pick his own shows. This was done directly until incorporating the company in 2013.  The issue was whether the IR35 legislation applied and that he should be treated, for tax purposes, as an employee of the broadcaster.

The First-tier Tribunal held that the IR35 legislation did apply. They looked at the actual contractual arrangements, any hypothetical contract between Mr Thompson and the broadcaster and then the employment status of the hypothetical contract. On that analysis it was found that he would have been regarded as an employee of the broadcaster. This led to a required payment sum for income tax and national insurance of £295,306.

On appeal, the appellant claimed that there was an error in interpreting the actual contract.  The actual contract stated that services were to be provided on an ad hoc and when required basis. This was interpreted as ‘as and when required’ by the broadcaster. The Upper Tribunal agreed with this analysis citing that it was the natural meaning of the phrase.  Further, it was found that it demonstrated an employee like relationship considering that all directions from the broadcaster would have to be complied with and that Mr Thompson would have to travel to any destination as may be required by the broadcaster. This gave the control as would be seen in an employee-employer relationship.

In looking at the hypothetical contract, there was heed given to the fact that there were informal arrangements for Mr Thompson’s television appearances but did not support a conclusion that he had a right to refuse work. The fact that the broadcaster would accommodate the rare situations in which Mr Thompson was unavailable was not an indication that he a contractual right not to work. In looking at the hypothetical contract against the three-stage test in Ready Mixed Concrete it was found that it would be one of an employee-employer relationship. The fact he was paid a block fee regardless of time spent ‘on air’ and that he was able to give personal opinions when conducting the work did not displace the finding that it would be one of employee-employer.

The IR35 legislation continues to provide some useful examples of where an employee-employer relationship would be found in situations where there are companies and contracts established trying to get away from that for the purpose of tax.  Here the fact that there was some scope within the contract to not take on work was not borne out in terms of the facts and the point that Mr Thompson could provide his own personal opinion again did not displace the conclusion that he was acting as an employee.

You can read the case in full here:
https://assets.publishing.service.gov.uk/media/67d82fbc4e1deef5a8c15e8e/PD__MJ_v_HMRC_final_decision.pdf