A former professional rugby union player turned Sky sports pundit had his IR35 appeal to the First-tier tax tribunal upheld by a judge.

Stuart Barnes’ limited company, S&L Barnes Limited (SLB), was under investigation for contracts held with Sky TV Limited, for the provision of punditry services between 2013 and 2019.  The overall amount under appeal is £695,461.97 (not including interest) in PAYE and National Insurance Contributions (NICs), and relates to these tax years.

The principal issue in the appeal is whether on the facts, the intermediaries legislation (IR35) applies to the contractual relationship between Barnes, SLB and Sky. If the legislation applies, then tax liabilities to income tax and national insurance contributions arise for SLB.

Barnes successfully appealed at a first-tier tribunal held on 27-29 July 2022, with the verdict announced on 12 January 2023. 

The Tribunal hearing in July 2022 applied the three-staged test of Ready-Mixed Concrete following the clarifications made in the Atholl House Court of Appeal ruling only a few months earlier, in April 2022. While the pre-conditions within the first two stages of RMC were met, when applying the multi-factorial analysis at the third stage, Judge Heidi Poon concluded that the cumulative totality of the provisions in the hypothetical contract in the context of the parties' conduct and intention, meant that she considered the contracts would not have been contracts of employment, thereby upholding the appeal.

The judgment noted, “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.”

“The second compelling indicator is the degree of autonomy Mr Barnes had in relation to how he fulfilled his role as a commentator for Sky Sports coverage,” the judgment noted.

Seb Maley, CEO of IR35 expert Qdos, said, “This is a big victory, not just for Stuart Barnes, but for freelancers, contractors and the businesses engaging these workers. 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.”

Dave Chaplin, CEO of IR35 Shield, said ‘there is a fundamental lesson’ to be learnt from this case that ties into what he calls ‘unsafe status determinations’. “Where status determinations are made based on poorly drafted contracts, you can guarantee that HMRC is more likely to issue a tax bill, which can only be overturned by appealing to a costly tax tribunal,” Chaplin said.