What this news means for other directors with PSCs
Holmes has lost a First Tier Tribunal (FTT) appeal regarding his status as a freelancer under IR35 rules when a judge determined that his contract with ITV and the programme effectively amounted to employment.
This decision leaves him liable to an unpaid tax bill of £250,000.
His personal services company (PSC) called Red, White and Green Ltd (RWG) was set up in 2001. Holmes began presenting on This Morning in 2006 doing so for a period of about 15 years.
The tribunal heard details of four contracts between ITV and RWG during this period, under the terms of which RWG were required to procure Holmes’ services on an exclusive basis during the specified period or on dates agreed with the executive producer.
He also worked with Sky News between 2011 and 2015 but the tribunal heard that for the tax years 2011/12 and 2012/13, RWG’s main income stream was from This Morning.
As well as a fixed fee for each programme, his contract gave Holmes additional benefits including the provision of a car for travel to the studio, a £5,000 clothing allowance and additional travel and accommodation allowances for certain trips.
HMRC mean business
There was some argument about the extent of control between ITV and RWG but the judge concluded that there was sufficient mutuality and a framework of control to place the contract between ITV and RWG in the employment field.
ITV was required to provide work on specified dates for a fixed fee and Holmes was required to work on those dates for the fee.
In terms of control, ITV had full control of editorial content, was able to restrict Holmes’ other commercial activities and could require him not to appear on the programme in branded clothing for example.
The FTT concluded that there was sufficient mutuality and at least a sufficient framework of control to place the assumed relationship between ITV and Holmes in the employment field.
An HMRC spokesperson said: “HMRC welcomes the judgement, which confirms we took the right approach.
“The tax rules require that employment taxes are paid even where a person works through their own company, HMRC ensures that tax is paid in accordance with those rules.”
Eight notable TV and radio presenters have challenged HMRC so far at tribunal. Five have lost their cases and HMRC are appealing two of the other cases.
The only case HMRC lost and didn’t appeal involved the notable PSC of Lorraine Kelly where she successfully argued that she was playing an exaggerated version of herself rather than appearing as herself.
What the confusion proves is that sudden change in circumstance or fortune could prove terminal for any business.
If HMRC have dropped an unexpected hammer onto your finances or you’re facing another unexpected threat then get in touch with us.
One of our expert team of advisors can arrange a convenient, free initial consultation to discuss what issues you face and how best to tackle them – together.