IR35 Tax Avoidance | Kangs Tax Tribunal Solicitors
It was recently reported that HMRC has defeated an IR35 appeal brought before the First Tier Tribunal by BBC journalists Joanna Gosling, David Eades and Tim Willcox.
Tim Thompson of Kangs Solicitors outlines the dispute.
What is IR35? | Kangs Specialist Tax Solicitors
- The Finance Act 2000 introduced IR35 in order to combat ‘disguised employment’ by preventing an individual avoiding tax by purporting to be self-employed or freelance when, to all intents and purposes, that person was an employee of a company with which they had a work contract.
- Invariably, the individual would operate through a limited company set up to receive the contracted payments and would then receive payment through that company by way of dividends, which would reduce the tax burden.
- When operating ‘within the scope of IR35’, the level of tax liability can change significantly.
- The operation of IR35 is designed to prevent abuse of the system whereby, for example, an employee ceases to be an employee on the last day of one month but returns to the same role on the first day of the next but as a self- employed person, the director of their own company.
- IR35 affords HMRC the power to collect under-paid tax liabilities which have accumulated through such conduct.
The BBC Case In Focus | Kangs First Tier Tribunal Tax Team
- Each of the three journalists were forced by the BBC to incorporate companies to receive payments for ‘contracts’ completed during the period 2003/2004 – 2014 thereby classing them as freelance contractors and not employees.
- HMRC had been investigating the journalists for eight years and found that they fell under the IR35 legislation with the result that unpaid tax had accrued.
The three appealed to the First Tier Tribunal and it has just been reported that:
‘the tribunal ruled in that the presenters’ relationship with the BBC “was in the employment field” because the BBC had ultimate control of the presenters’ work and there was “sufficient mutuality” in their obligations to one another. the FTT found in favour of HMRC and the considerable accumulative tax bill of £300,000 remains.’
Statements Of Both Parties | Kangs Tax Appeal Solicitors
In a joint statement, the three presenters said:
‘We have endured eight years of HMRC investigation and eventual determinations to reach this point on what is clearly a difficult and unclear subject even for judges,” they said. “It has been a depressing and stressful period for each of us. However, we are grateful that the judgment, in its entirety, shows we have acted in good faith throughout.’
HMRC welcomed the judgment, stating:
‘It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and national insurance contributions as employees.’
How Can We Help? | Kangs HMRC Defence Solicitors
Please feel free to contact our team through any of our solicitors named below who will be happy to provide you with some initial advice and assistance.