HMRC secured a victory yesterday successfully overturning an IR35 defeat at the Upper Tribunal against a radio broadcaster.

Last year, Paul Hawksbee, a radio presenter for Talksport, defeated the HMRC in an IR35 case at the First-Tier Tribunal. The HMRC argued that Hawksbee was an employee which meant he would be liable for income tax and National Insurance contributions.

Hawksbee had established KPL, a personal service company, which had provided Hawksbee’s services as a radio broadcaster to Talksport from 2012 to 2015. At the First-Tier Tribunal the judge said Talksport controlled the where and when of Hawksbee’s employment, but added ‘that is of relatively little significance compared to control of the how and what.’

The First-Tier Tribunal concluded that there would have been two hypothetical contracts, mirroring the fact that there were two actual contracts between Talksport and KPL.

Upper Tribunal Judge Zacaroli noted that, while the First-Tier Tribunal did not state expressly that Talksport had no obligation to provide Hawksbee with work under the two hypothetical contracts in question, it said that reading the decision as a whole that it was clear this was the First-Tier Tribunal’s conclusion.

Zacaroli said that the First-Tier Tribunal made errors of law when reaching the conclusion that the actual contracts between KPL and Talksport imposed no obligation on Talksport to provide shows for Hawksbee to present. Zacaroli added that the First-Tier Tribunal’s conclusion that the hypothetical contracts contained no obligation on Talksport to provide work was highly material to the First-Tier Tribunal’s overall decision.

In the decision, Zacaroli added that there was a sufficient framework of control to satisfy stage two of the Ready Mixed Concrete analysis. This included the ultimate right to decide on the form and content of a particular episode of the show.

The decision added that the First-Tier Tribunal erred in law and/or took into account an irrelevant consideration in finding that Hawksbee would not have been “part and parcel” of Talksport under the hypothetical contracts.

Zacaroli concluded, “Taking all of the relevant factors into account, we consider that viewed as a whole they are not inconsistent with the hypothetical contracts being contracts of employment.”

As a result of the decision, Hawksbee will be expected to repay the reported £140,000 owed in tax liabilities.

Dave Chaplin, CEO of contracting authority ContractorCalculator, said, “This is a surprising and unexpected ruling. Some careful analysis will be required before drawing any firm conclusions on how it will impact IR35 and Off-Payroll for more traditional based contractors.

“The case law on presenter cases is still settling down through the courts and the decisions being made can appear to contradict each other,” Chaplin added. “All of the cases have their own unique nuances, and a common theme is badly drafted contracts that don’t reflect the reality of the situation.”

Seb Maley, CEO of IR35 specialist Qdos, said, “The fact that this case was by no means clear cut also goes to show how important it is that IR35 status is set with care and after careful consideration of the written contract and a review of the working practices. Contractors, along with hiring organisations and recruitment agencies, need to be acutely aware of this when deciding if the service provided reflects self-employment or employment.”

“As concerning as this result is, it’s worth pointing out that Mr Hawksbee’s engagement - like many other presenters who have faced an IR35 investigation - is quite different from a typical contractor's. In our experience, the vast majority of contractors are genuine and belong outside IR35,” Maley said.

“This is a rare win for HMRC, but one that shines a light on the needless complexity of the IR35 legislation, which can easily be misinterpreted and misapplied,” Maley concluded.