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HMRC’s surprise victory puts IR35 back on the agenda

A presenter for talkSPORT radio faces having to pay £140k in back taxes after HMRC overturned an earlier tribunal finding. Brian Palmer analyses the implications.

The Upper Tribunal (UT) ruling has blindsided IR35 experts, who have deemed it “surprising and unexpected”. It goes to show the unpredictability of the IR35 process. 

With all that has happened over the recent months, you could be forgiven for thinking IR35 had gone away. However, nothing could be further from the truth.

This coup for HMRC is a timely reminder that the burden of determining IR35 status is about to be placed on the shoulders of medium and large private-sector employers from next April.

What is IR35?

Put simply, IR35 is 20- year-old legislation designed to crack down on the practice of hiring individuals through an intermediary, such as their own personal service company, as a means of evading tax and national insurance liabilities.

It used to be solely a contractor’s responsibility to determine their IR35 status. However, over the years successive changes in legislation have eroded that position.

In April 2017 the most significant change flipped the situation for those engaged by public sector organisations. As a result, the engager was made responsible for determining whether IR35 rules should apply, and for deducting and paying the right tax and NICs.  This change was known as off-payroll working in the public sector, and from 6 April 2021 will be extended to the private sector.

AAT guide to IR35

AAT has produced a technical guide to IR35 determinations, payroll and tax, which can be accessed in AAT Knowledge Hub.

View guide

What is the talkSPORT case?

talkSPORT presenter Paul Hawksbee successfully won an appeal over his IR35 status at a First Tier Tribunal (FTT). It was a narrow decision, with Judge Scott using his casting vote to rule him outside of IR35.

HMRC didn’t take defeat lying down. It appealed, leading to a spectacular victory in the UT. As a result, Hawksbee’s company Kickabout Productions Ltd faces a tax and NIC liability of £143,126.

Facts of the case

Kickabout Productions Ltd was paid a flat fee per show for Hawksbee, who had been hosting the show for 18 years and was required by talkSPORT to present weekdays for 44 weeks of the year. He had no employee rights or benefits.

The first, of the two contracts reviewed prohibited Hawksbee from working for any other UK radio broadcaster during the term of the contract. Although, he was allowed to do work which did not interfere with his talkSPORT duties.    


HMRC focussed its appeal on the FTT’s Mutuality of Obligation and Control findings.

Mutuality of Obligation (MOO) is the obligation on an employer to provide work and on the employee to accept that work. The existence of MOO is taken to be a strong indicator of an employment relationship.

FTT panel members had agreed on the presence of MOO only for Judge Scott to state he did not consider it to be strong indicator of employment in the case. In response, the UT concluded he had made an error of law and remade the decision.


The UT did not accept HMRC’s argument that the FTT failed to express a conclusion on whether there was sufficient control or not for an employment relationship.  It found that while talkSPORT had little control over he went about his work, it did have control over how he performed his tasks, when and where he performed those tasks.

The UT concluded that talkSPORT exercised control to a level consistent with an employment contract. 

Other factors

After considering other factors to establish if they pointed at self-employment or employment, it concluded they were sufficient to indicate the existence of a hypothetical contract of employment.

Ultimately, when deciding the appeal’s outcome, the UT adopted a ridged three-step process to reach its conclusion:

  1. Is there sufficient MOO for employment relationship – if not go to step 2.
  2. Is there sufficient control for an employment relationship – if not go to step 3.
  3. Look at all the other indicators of employment and self-employment and take a view.

The UT examined the MOO factors and concluded that they were sufficient to indicate an employment relationship. At which this finding was sufficient to support one of the two grounds on which HMRC appealed the case and avoided the need for the UT to advance beyond step one of its three step process.

So where does this leave us?

After 20 years of IR35, it is still as controversial as ever.  Over recent years successive HMRC/government initiatives have sought to tighten the scope and focus of the legislation.

However, as Paul Hawksbee is finding, surprises can be costly as well as unpleasant.

As an AAT Licensed Accountant, you need to keep on top of emerging tribunal cases and future legislative developments.

You also need to ensure clients and employers are taking adequate steps to prepare for the changes that come in next April.

Support from AAT

If you’re an AAT professional member, AAT will be here to support you through these changes. We’ll provide guidance to ensure that you have the right level of information at the right time to keep your clients, employers or others who rely on your advice informed.

Further reading

Brian Palmer , former tax policy adviser for AAT..

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