In the wake of the Atholl House/Kaye Adams case, yet another notable IR35 case has emerged, this time involving Sky Sports pundit Phil Thompson. Thompson, who rendered services to Sky on Soccer Saturday and various other programs through his personal service company (PD & MJ Ltd), found himself under scrutiny from HMRC. The tax authority asserted that the Chapter 8 intermediaries legislation (IR35) applied, contending that PD & MJ Ltd owed approximately £294,306.68 for PAYE and national insurance contributions (NICs) spanning from 2014 to 2018.

IR35: was Thompson employed?

Examining a Hypothetical Contract The first-tier tribunal (FTT) was tasked with assessing whether a hypothetical contract existed and whether, under that hypothetical contract, Thompson had an employment contract with Sky or operated as self-employed under a contract for services. Drawing on Rebecca Cave’s insights into the tests for the hypothetical contract in her Accounting Web article “IR35: Kaye Adams wins marathon fight with HMRC,” the tribunal concluded that the hypothetical contract would have been one of employment for several reasons.

Mutuality of obligations was acknowledged by all parties, with Thompson obligated to provide services according to the contract terms, and Sky committed to paying the agreed fee. Control was substantial, as Sky’s contractual right to dictate Thompson’s service location aligned with an employment relationship. Despite consensus, the level of control was not undermined. This differs from the Atholl House case, where control was not considered in Stage 3C of the decision. The pundit role did not sway the tribunal, emphasising that even highly skilled individuals can be subject to control, as demonstrated in the Atholl House case. Unlike Atholl House, where Adams had her own brand, Thompson’s role limited his ability to exploit opinions, analysis, and intellectual property outside the contract terms. The hypothetical contract allowed termination by Sky but not by Thompson. Thompson’s association with Soccer Saturday, coupled with his integral role according to public expectations, supported the contract of employment. This contrasted with the FTT’s decision in Atholl House, where being “part and parcel” of the BBC was deemed neutral. Payment in a block fee, regardless of airtime, was considered neutral by the FTT. The determination of salary or fee hinged on the nature of the employment contract rather than the label chosen. The substantial majority of PD & MJ Ltd’s earnings (averaging 80% during relevant periods) came from Thompson’s work at Sky, forming a significant part of his professional income. Despite the absence of perks and benefits given to Sky employees, not afforded to Thompson, the tribunal deemed other factors outweighed this disparity.

Viewing the Whole Picture Taking a holistic perspective, the combination of factors indicated a contract of employment. The tribunal did not consider Thompson’s subsequent employment status, as it occurred after the relevant period.

The FTT acknowledged a departure from the Barnes case (Stuart Barnes vs HMRC [2023] UKFTT 00042) due to differing facts. Barnes operated more independently and had the ability to reproduce opinions in other media, distinguishing him from Thompson, who was closely associated with Sky.

Distinct Persona Brands Notably, this case wasn’t stayed pending the Atholl House outcome, suggesting its non-binding nature. The judgment only references Atholl House in the Court of Appeal. Unlike Adams, Lorraine Kelly, Adrian Chiles, and Stuart Barnes, who are recognised as personal brands, Thompson lacks these attributes.

It is important to note that this FTT decision doesn’t establish a precedent, and Thompson has 56 days to appeal.

Navigating the intricacies of IR35 is vital for businesses and contractors alike. Employing tools like the IR35 calculator and investing time in understanding these rules can prevent complications and potential penalties. For more insights into employment contracts, or for help navigating the intricacies of IR35 contact us directly.