Contracts between freelance workers and their employers are set for another round of scrutiny by HMRC following Sky Sports commentator Alan Parry losing an appeal against a £356,000 tax bill before the First-Tier Tribunal.
According to IR35 Rules, any contractor seen as not being genuinely self-employed but as a “disguised employee” for tax purposes is liable for income tax and national contributions. The Rules essentially operate to curb purported contractors and freelance workers seeking to hide their status when they are actually employees.
The football commentator had appealed a HMRC claim where the latter had contested that the contracts held between Alan Parry’s company, Alan Parry Productions Ltd, and BSkyB between the tax years of 2013/14 to 2018/19 amounted to a employment relationship and not self-employment. Classing the relationship under the former would mean that Mr Parry would have been liable to pay income tax and national contributions for the relevant years.
The First-Tier Tribunal found that the terms of the relationship between Mr Parry’s company and Sky were ones that reflected a relationship of employment as opposed to self-employment. Holding that IR35 Rules did apply to the concerned tax years means that Mr Parry is now left with a payable tax bill of £356,420.37.
Observing the factors of the relationship, the Tribunal found that the level of control by Sky over Mr Parry was one greater than would usually be under the rules and freedom afforded to a freelance worker. The Tribunal noted how, amongst other things, Mr Parry was obliged to work under Sky’s directions which encompassed decisions such as which matches Mr Parry commented on and where from. Other factors which made the relationship akin to employment was the fact that Mr Parry had to seek consent from Sky before he could undertake any additional work for clients. In such circumstances, the Tribunal found that Mr Parry was a ‘disguised employee’ for Sky and, thus, was liable under the IR35 Rules; his appeal was dismissed.
Whilst Mr Parry is able to appeal to the Upper Tribunal within 56 days, the case does, notwithstanding, highlight the need to comply with IR35 rules and guidelines. Failure to do so, as has been seen over the past few years in similar cases, may lead to tax battles resulting in large sums of tax liabilities.
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