HMRC vs Eamonn Holmes – what does this mean for freelancers? DAS Law

HMRC wins ‘freelance’ case against TV host Eamonn Holmes – What

does this mean for the rest of us?

 The recent court case involving ’This Morning’ host Eamonn Holmes and HRMC over his remuneration has highlighted the issue of how workers are categorised. The TV presenter claimed that he is a freelancer, meaning he is paid through his own company, however HRMC had a different view and the case went to court where the ruling went in favour of HMRC.

How can people stay on the right side of the law when it comes to their employment status and tax?  Nicole Rogers from DAS Law has the answers.

Do you think the recent Eamonn Holmes case opens the floodgates when it comes to these kinds of cases, and HMRC pursuing individuals?

Possibly; private sector individuals are coming under more scrutiny and Eamonn Holmes is one of a few TV personalities to have lost at the First Tier Tribunal. However, whilst not directly relating to IR35, the floodgates seem to have been open for some time as the courts have shown willingness to determine status as an employee or worker in other recent high profile cases.

What are the rules governing whether a person is considered freelance or employed?

This has been a topical subject and has attracted much attention recently. Employment status is generally split between employee, worker and self-employed, with the latter usually subject to different rules for tax and NI.

By way of background, the status of an individual is a question for the Employment Tribunal but generally, the following components are typical for each category;

Employees

• Mutuality of obligation – must provide work and must accept work
• Employer pays tax and NI
• Employer exercises control over how employee works
• Cannot supply a substitute
• Uses employer equipment

Workers

• No mutuality of obligation
• Arrangement is casual
• Some degree of control
• Cannot supply a substitute
• Employer pays tax and NI
• Uses employer equipment

Self-employed

• No mutuality of obligation
• May work autonomously – minimal degree of control
• Uses own equipment
• Pays own tax
• Can supply a substitute

The IR35 legislation was introduced as it was perceived that individuals could engage in particular forms of tax avoidance. Individuals were able to supply their services through an intermediary, usually their own personal company, resulting in them being able to circumvent the obligations to pay employee income tax and National Insurance contributions.

The IR35 rules seek to ensure that individuals, who would otherwise be regarded as employees had they been providing their services directly, are broadly subject to the same tax and National Insurance obligations as regular employees.

What can employers/employees do to make sure they stay on the right side of the law?

Taking legal advice and following HMRC guidance is a sensible step as the IR35 rules are complex and are often challenged. Generally, the status of an individual and the components displayed above will be of significant importance; merely labelling a person as ‘self-employed’ will be subject to great scrutiny if the day-to-day treatment is similar to that of an employee.

Having said that, whilst the practical reality of an engagement is paramount, the written contracts will also be relevant. It is likely that two contracts will be present; one between the employer and the intermediary company and one between the intermediary company and the individual. Both contracts should be professionally drafted, but it is arguable that the former will be of most importance. This is because the contract would need to bear the hallmarks of a self-employed arrangement.

It is highly advisable for employers to take legal advice on the changes relating to IR35 due in April 2020.