McCann Media Limited v The Commissioners for HMRC
[2024] UKUT 94 (TCC)
The Commissioners for HMRC v S & L Barnes Limited
28 August 2024
[2024] UKUT 262 (TCC)
Upper Tribunal
A rugby commentator worked for Sky through his own company. A lower court said he wasn't an employee for tax purposes, but a higher court disagreed. The higher court decided, after reviewing the facts, that the commentator was really a Sky employee and should pay taxes accordingly.
Key Facts
- •Stuart Barnes, a renowned rugby commentator, provided services through his personal service company, S&L Barnes Limited (SLB), to Sky TV.
- •HMRC argued that the contracts fell under IR35, making Barnes liable for income tax and NICs as if an employee.
- •The FTT allowed SLB's appeal, finding that the hypothetical contract wouldn't constitute employment.
- •HMRC appealed to the Upper Tribunal (UT) on two grounds: the FTT's construction of the hypothetical contract's 'right of first call' and its application of the third stage of the RMC test.
Legal Principles
IR35 intermediaries legislation aims to prevent individuals from avoiding tax and NICs liabilities by using a corporate structure.
R (Professional Contractors Group & Others) v IRC [2001] EWCA Civ 1945
Determining IR35 applicability involves a three-stage analysis: (1) terms of actual contracts, (2) terms of the hypothetical contract, (3) whether the hypothetical contract is one of employment or services.
Kickabout Productions Ltd v HMRC [2022] EWCA Civ 502
The RMC test for employment status involves mutuality of obligation, control, and a third stage considering other factors.
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497
In constructing the hypothetical contract, the tribunal considers all circumstances, including the actual contract terms and the parties' conduct, but the actual contract is not determinative.
HMRC v Atholl House Productions Limited [2022] EWCA Civ 502 and HMRC v Atholl House Productions Ltd [2021] UKUT 37 (TCC)
An appeal against findings of fact is only possible if the FTT made an error of law (e.g., no evidence, contradictory evidence, only reasonable conclusion contradicted the finding).
Edwards v Bairstow [1956] AC 14
At the Third RMC Stage, all relevant factors consistent and inconsistent with employment must be weighed; it's a multi-factorial assessment.
Kickabout Productions Ltd v HMRC [2022] EWCA Civ 502
Outcomes
HMRC's appeal on Ground 1 (regarding the FTT's interpretation of Sky's right of first call) was dismissed.
Sufficient evidence supported the FTT's finding that the right of first call was modified by the parties' conduct and understanding.
HMRC's appeal on Ground 2 (regarding the FTT's application of the Third RMC Stage) was allowed.
The FTT erred by considering irrelevant factors, mischaracterizing some factors, and failing to consider material factors consistent with employment. The UT remade the decision, finding that the hypothetical contract would have been one of employment.