Empowering the Freelance Economy

What can contractors learn from the Stuart Barnes IR35 case?

Stuart Barnes has won his IR35 case appeal. Photo source: Polaris Publishing
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Sky Sports presenter and former rugby union pro, Stuart Barnes, has won a £695,000 IR35 case against HM Revenue & Customs.

Known as the “voice of rugby” for his television commentating and articles published across different publications, HMRC had accused him of working as a “disguised employee,” it has been reported.

Barnes’ limited company, S&L Barnes Limited, was under investigation for contracts held with Sky TV Limited, for the provision of punditry services between 2013 and 2019. 

HMRC was of the view that Barnes should have been operating inside the IR35 legislation and, as a result, was demanding a total of £695,461.97 in tax. This was made up of £481,364.20 in PAYE and £214,097.77 in National Insurance Contributions (NICs).

Other Sky TV presenters have not been so lucky with their appeals which have been dismissed by the FTT, according to reports. So, what made this case different?

The IR35 appeal by Barnes was upheld by Judge Heidi Poon, who found there was enough compelling evidence to prove that Barnes’s contract with Sky was just one part of his brand that accounted for 60% of his income on average, “while over £150,000 on average would also be earned from other clients”, the Telegraph reported.

The judge sided with Barnes, deeming the pundit not a disguised employee, and therefore belonging outside the IR35 legislation, due to being in ‘business on his own account’. For example, in addition to his work with Sky TV, Barnes was also a columnist for the Daily Telegraph between 1994 and 2005, and also wrote for other newspapers.  

Keep a varied client base and revenue stream

The case notes state:

 The most compelling indicator is that the appellant’s contract with Sky was but one part of the brand, and contributed on average 60% of the appellant’s income, while over £150,000 on average would also be earned from other clients. Sky knew Barnes was in business on his own account and worked for other broadcasters; Sky welcomed that fact and wanted the world’s best commentator for the coverage.

Contractor insurer Qdos’ CEO, Seb Maley, said the appeal win is good news for the contractor industry.

“This is a big victory – not just for Stuart Barnes, but for freelancers, contractors and the businesses engaging these workers,” said Maley.

“It’s another reminder to risk-averse businesses that contractors can be engaged outside the scope of the IR35 legislation. This win could prove crucial in making it crystal clear to firms that forcing all contractors onto the payroll is unnecessary, not to mention expensive,” said Maley.

He continued: “That Barnes was deemed genuinely self-employed based on being in business ‘on his own account’ is important, too. There are many factors to consider when determining IR35 status – something that all parties must bear in mind.

“The less said about HMRC the better. As the creators and enforcers of the IR35 legislation, the tax office is ramping up its activity but still struggles to recognise compliance more than two decades after the introduction of these rules,” said the insurer and IR 35 compliance specialist.

A spokesman for HMRC said according to The Telegraph: “We note the decision of the tribunal and will carefully analyse this outcome before considering next steps.

“The off-payroll rules ensure that people who work like employees, but through their own limited company, are taxed like employees, creating a level playing field with other workers.”

HMRC may still want to challenge the case

Dave Chaplin, CEO of IR35 Shield and Contractor Calculator, said in a report on his site: “This is the fourth Sky TV case to go before the FTT, on almost identical contractual conditions, and the second after the crucial Atholl House Court of Appeal ruling.”

“It’s notable that the Tribunal constructed the hypothetical contract as largely a question of fact, using terms based on a combination of the documents between the parties, and partly from their conduct,” said Chaplin.

He continued: “That approach differs from the other Sky TV cases that have taken a more literalist approach to the construction. That approach may arguably be considered as causing too much violence to the actual contract, leaving the door open for a challenge by HMRC.”

Chaplin said the flawed design of the original IR35/Off-Payroll rules, which passed the hirer’s tax bill onto the contractor, is one reason why many firms in the media profession, including the BBC, insisted that sole traders incorporate and provide their services via limited companies.

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