Eamonn Holmes, IR35 and “control”
Unlike the Lineker case, the Holmes case examined the nature of the relationship between the parties (in this case, ITV as the “end user” in receipt of his services, “Red White and Green Limited” which is Mr Holmes’ personal services company, and Mr Holmes himself). The court found that the extent to which Mr Holmes was subject to the “control” of ITV was sufficient to create an employment-like relationship between ITV and Mr Holmes.
The judgment builds on recent IR35 cases to confirm a broad definition of “control”, particularly in relation to the overarching “framework of control”, with potential knock on effects for contractors in other industries.
Mr Holmes’ arguments in favour of a genuine self-employment
Mr Holmes was engaged by ITV to present This Morning, and bring “his own stamp and interpretation to the programme”. He was not told what to say or even where to be (other than, quite obviously, in front of the cameras at the right time). He often did not attend production meetings and rehearsals and he “sometimes” attended post show de-briefs out of choice. He generally did his own research, and was free to disregard information provided to him by ITV.
It is accepted that “Mr Holmes was regarded as 'self-sufficient' in his role, and more than any other presenter he would 'do his own thing'”.
Neither he nor ITV ever considered there to be an employment relationship – they stated such in each of their engagement contracts. As one would expect in such an arrangement, he did not receive employee type benefits like sick pay, holiday pay, or pension benefits.
A question of control
The court drew a distinction between a) the “control” that Mr Holmes had over what he said and how he conducted himself; and b) the “framework of control” exercised by ITV over what Mr Holmes actually did. That framework included that:
- ITV had the right to decide which guests would be interviewed on the programme and which topics would be covered;
- Mr Holmes was required to comply with ITV’s health and safety guidelines and all rules and regulations of Ofcom; and
- Mr Holmes acknowledged that “[ITV] shall have absolute discretion and control over the editorial content of the Programme and the Products of [Mr Holmes’] Services”.
These factors together were sufficient for the UT to confirm the FTT’s finding that these factors together were sufficient for him to be treated as an employee for tax purposes. They rejected the argument that the FTT wrongly focussed on editorial control, which relates primarily to “how” (rather than “what”) tasks are performed.
The UT reiterated that the control test in Ready Mixed Concrete requires consideration of not just “what”, but also “how”, “where” and “when” tasks are performed.
It drew on the decision in the Christa Ackroyd case, which, when considering regulatory control exercised by the BBC, said “it would have been wrong to leave such control out of account simply because the guidelines applied to employees and non-employees alike”. Further, editorial control was described by the Court of Appeal in the Kickabout case as being “highly relevant”.
While these cases against TV and radio presenters appear quite fact specific, the courts’ application of the IR35 legislation might be applied to other industries, in relation to what constitutes “control”.
It is not uncommon for a financial services company to engage a consultant who must agree to adhere to FCA requirements (adherence to which must be overseen by the engaging company). This is not dissimilar to Mr Holmes’ requirement to adhere to Ofcom regulatory guidelines (a breach of which would have constituted a breach for ITV). In this scenario, a key lesson from the Holmes case is that the courts might see oversight by the end user as an indication of a “framework of control”, which may be determinative even in the context of other factors that seemingly point to self-employment.
Other employment status factors considered
In the Holmes case, the UT went on to say that the existence of mutuality of obligation and control were not, together, enough for it to be said there is automatically an employment-type relationship – other employment status factors must be taken into account (even if they may not carry as much weight as these two factors). They provided the following further comments:
- for “doing business on one’s own account” to be relevant, the facts and circumstances of each engagement must be considered, as it is perfectly possible to be employed alongside operating in business on one’s own account;
- the absence of employment-type benefits such as sick pay, holiday pay and pension benefits were considered to be of “little weight”;
- the fact that a contractor might incur costs themselves may be a neutral factor if that contractor might have incurred such a cost in any case in respect of an employment (in the Holmes case, the cost in question was in relation to an agent engaged by Mr Holmes personal service company); and
- “no employment” clauses, and the mutual intention of the parties may be relevant in borderline cases (but Holmes was not such a case).
In confirming the FTT’s wide definition of “control”, and placing less emphasis on wider employment status factors (particularly in relation to doing "business on one’s own account” more generally) HMRC will see the Holmes judgment as a milestone victory.
Businesses who must have oversight of workers’ activities (e.g. due to regulatory frameworks such as FCA regulated activities) should carefully consider whether consultants are actually truly autonomous for the purposes of IR35.
Contractors will likely see this case further muddying of the waters around employment status, and we can expect more to be written about the perceived unfairness of the IR35 legislation where individuals may be taxed as employees without the other benefits of employment.
Since the rules changed in April 2021, many commentators have called for a statutory test for employment status, to reduce the uncertainty for businesses and contractors alike. However the introduction of a statutory test was rejected in a Government consultation in July 2022. Cases like Holmes' suggest that it is not so much the status test that creates the uncertainty but, rather, the need to apply it in borderline cases to complex commercial relationships, where each of the employment status factors can bear different evidential weight in the overall picture. As such we might expect to continue to see more IR35 cases reach the courts, and there is no obvious solution to the challenges facing businesses in this area of law.