Lorraine Kelly wins freelancer ruling
Kelly presents ‘Lorraine’ on weekday mornings on ITV and had received the tax bill in 2016 after HMRC said she was an employee rather than a freelancer.
The judge said she was a ‘self-employed star’ and she could be paid through the company she runs with her husband.
In dispute was a contact Kelly signed in 2012. The BBC reported that Judge Jennifer Dean ruled that Kelly’s relationship with ITV “was a contract for services and not that of employer and employee”.
Other swing factors in the decision were that Kelly did not receive staff benefits such as holiday or sick pay and was allowed to carry out other work.
Judge Dean said: “We did not accept that Ms Kelly simply appeared as herself – we were satisfied that Ms Kelly presents a persona of herself, she presents herself as a brand and that is the brand ITV sought when engaging her. All parts of the show are a performance, the act being to perform the role of a friendly, chatty and fun personality.
“Quite simply put, the programmes are entertaining, Ms Kelly is entertaining and the ‘DNA’ referred to is the personality, performance, the ‘Lorraine Kelly’ brand that is brought to the programmes.”
James Hender, partner and head of private wealth at Saffery Champness said: “HMRC has been given a bloody nose by a Tribunal over IR35 with this case being yet more evidence of just how complex the tax law in this area is.” IR35 is the rule that governs self-employment versus employment.
Hender added: “There are two factors which are adding to this complexity. Firstly, understandably HMRC is seeking to plug the tax gap and crack down on what it considers to be avoidance – using an evolving toolkit of regulations, such as IR35, to do so. Secondly, the changing world of work, not least including the so-called gig economy, means that the tax man is trying to play catch up with market innovation – which will always have set backs and teething problems. Fundamentally there is a balance to be struck which provides for a tax system that is both fair and cognisant of the need to facilitate innovation and flexibility for individual tax payers.
“With IR35 for the private sector due to take effect from April 2020 and government consulting on tightening the rules further it’s likely that we’ll see many more cases like this over the next few years as both HMRC and taxpayers seek to get to grips with this rapidly evolving area of tax law. Where an individual meets the test to be self-employed this can still be an attractive way to structure a business.
Employee versus freelancer – the HMRC tests
Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:
- they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit
- they can decide what work they do and when, where or how to do it
- they can hire someone else to do the work
- they’re responsible for fixing any unsatisfactory work in their own time
- their employer agrees a fixed price for their work – it doesn’t depend on how long the job takes to finish
- they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work
- they can work for more than one client
Someone is probably self-employed and doesn’t have the rights of an employee if they’re exempt from PAYE and most of the following are also true:
- they put in bids or give quotes to get work
- they’re not under direct supervision when working
- they submit invoices for the work they’ve done
- they’re responsible for paying their own National Insurance and tax
- they don’t get holiday or sick pay when they’re not working
- they operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’