Canal Street Productions Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 October 2019 |
| Neutral Citation | [2019] UKFTT 647 (TC) |
| Date | 25 October 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 647 (TC)
Judge Ashley Greenbank
David Goldberg QC and Laura Inglis, counsel, instructed by H W Fisher & Company, appeared for the appellant
Adam Tolley QC and Christopher Stone, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax and National Insurance – Intermediaries' legislation – IR35 – ITEPA 2003, s. 49 – Television presenter – Personal service company – Series of engagements under a framework agreement – Whether presenter would have been regarded as an employee if engaged under a contract directly with the television company – No – Appeal allowed.
The First-tier Tribunal (FTT) allowing the appeal against assessments on Ms Fospero's personal service company, found that the agreements with ITV Breakfast Ltd (ITV) were just part of the wider business carried on by Ms Fospero through Canal Street Ltd in which she undertook various types of presenting work. All the factors pointed towards Ms Fospero being regarded as self-employed and not an employee even if she had been engaged directly by ITV.
Canal Street Productions Ltd (the appellant) appealed against determinations of £80,000 for the tax years 2012–13 and 2013–14 relating to engagements between the appellant and ITV for the provision of the services of Ms Fospero as a presenter of programmes produced by ITV.
The issue in question was had Ms Fospero's services been provided under a contract directly between ITV and Ms Fospero (the hypothetical contract), she would have been regarded as an employee of ITV under s. 49 ITEPA 2003.
Ms Fospero was engaged by ITV through Canal Street Productions Ltd for appearances on “Daybreak” and “Lorraine” usually as a guest host presenter or news presenter for the period April 2012 to April 2014. Under the agreements, ITV anticipated being able to offer a minimum number of days work. However, there was no guarantee of work and no obligation on Ms Fospero to accept any work.
Once Ms Fospero had accepted an engagement, ITV retained control over the time and location at which the services were performed and editorial control over the programmes. However, the judge said these arrangements were little different from those which governed any other presenter whether employed or self-employed.
Under the hypothetical contract, although there were no continuing work-related obligations, there were continuing contractual arrangements in existence between Ms Fospero and ITV between the separate engagements which she undertook for ITV. Those arrangements did place restrictions on Ms Fospero's other commercial activities and imposed some obligations on her as regards her personal life. However, the judge stated that the contractual obligations which continued between the engagements did not detract from the inference that Ms Fospero was self-employed.
If Ms Fospero had breached any of these requirements, ITV's sanction would have been not to engage her again. They did not detract from the degree of independence and lack of subordination which the lack of mutuality of work-related obligations between the various engagements would indicate.
The judge held that the agreements with ITV were just part of the wider business carried on by Ms Fospero through Canal Street Ltd in which she undertook various types of presenting work. That business continued before and after the arrangements with ITV. During all of these periods, Ms Fospero's agents were seeking and she was undertaking work of various kinds for various clients.
He concluded that in the period in question, Ms Fospero was engaged, through Canal Street Ltd, in a separate business, she worked under a series of short-term engagements for ITV, she had no guarantee of further work outside those engagements and ITV had no obligation to provide any work. All of these factors pointed towards Ms Fospero being regarded as self-employed and not an employee even if she had been engaged directly by ITV.
The appeal was allowed.
This is another First-tier Tribunal loss for HMRC on IR35. Ms Fospero's work outside of ITV proved a crucial factor. The agreements with ITV were just part of the wider business carried on by Ms Fospero through Canal Street in which she undertook various types of presenting work.
This decision bears similarities with Atholl House Productions Ltd [2019] TC 07088 where the presenter won her appeal on largely similar grounds, although Ms Fospero did not derive a significant portion of income from providing services to other clients and merely relied on her agents to secure additional work.
[1] The appellant, Canal Street Productions Limited (“Canal Street”), appeals against determinations for income tax deductible via Pay as You Earn (“PAYE”) and a notice of decision in respect of Class 1 National Insurance Contributions (“NICs”) for the tax years 2012–13 and 2013–14. The determinations were made and the notice was issued by the respondents, the Commissioners for Her Majesty's Revenue and Customs (“HMRC”).
[2] The determinations and the notice relate to arrangements entered into between Canal Street and ITV Breakfast Limited (“ITV”) for the provision of the services of Ms Helen Fospero as a presenter of programmes produced by ITV.
[3] The amount of PAYE income tax assessed (not including interest) is £49,426.40: £19,613.60 in the tax year 2012–13 and £29,812.80 in the tax year 2013–14). The total NICs assessed (not including interest) are £31,344.56: £13,734.12 in the tax year 2012–13 and £17,610.44 in the tax year 2013–14. The total amount which has been assessed and appealed (excluding interest) is therefore £80,770.96.
[4] The determinations and notice which are the subject of this appeal are made under legislation which is referred to collectively as “the intermediaries legislation” or, perhaps more commonly, as “IR35”, a term which derives from the designation of the press release which announced the introduction of this legislation on 9 March 1999, the day of the Budget in that year. That legislation is now found in sections 48 to 61 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) and the Social Security Contributions (Intermediaries) Regulations 2000 (the “2000 Regulations”). I have referred to these rules together as “IR35” or the “IR35 legislation” in this decision notice.
[5] In summary, if the IR35 legislation applies to the arrangements between Canal Street and ITV, payments received by Canal Street from ITV are treated for tax and NICs purposes as if they are employment income or earnings of Ms Fospero, but the liabilities to account for income tax and NICs fall on Canal Street rather than Ms Fospero. The parties agree that these are the consequences if the IR35 legislation applies.
[6] The only issue before the Tribunal is whether the IR35 legislation can apply to payments made by ITV to Canal Street under the arrangements relating to the provision of Ms Fospero's services.
[7] The circumstances in which the IR35 legislation can apply for the purposes of income tax are set out in s49 ITEPA. So far as material, at all relevant times, s49 ITEPA provided as follows:
(1) This Chapter applies where–
- an individual (the worker) personally performs, or is under an obligation personally to perform, services for another person (the client),
- the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (the intermediary), and
- the circumstances are such that–if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or …
(3) …
(4) The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.
(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).
[8] There is an equivalent provision in the 2000 Regulations, which determines when the IR35 legislation applies for the purposes of NICs. It is found in regulation 6 of the 2000 Regulations. At all material times, regulation 6 provided, so far as relevant, as follows:
(1) These Regulations apply where–
- an individual (the worker) personally performs, or is under an obligation personally to perform, services for another person (the client),
- the performance of those services by the worker is carried out, not under a contract directly between the client and the worker, but under arrangements involving an intermediary, and
- the circumstances are such that, had the arrangements taken the form of a contract between the worker and the client, the worker would be regarded for the purposes of Parts I to V of the Contributions and Benefits Act as employed in employed earner's employment by the client.
(2) Paragraph (1)(b) has effect irrespective of whether or not–
- there exists a contract between the client and the worker, or
- the worker is the holder of an office with the client.
(3) …
(4) …
[9] The wording of s49 ITEPA and regulation 6 of the 2000 Regulations is similar, but not precisely the same. It was acknowledged by Henderson J in Dragonfly Consultancy Ltd v R & C Commrs [2008] BTC 639 (“Dragonfly”) (at [13] to [19]) that, in appropriate circumstances, the differences in wording – in particular, the fact that the 2000 Regulations do not contain an equivalent of s49(4) ITEPA – may lead to different conclusions as to the applicability of the IR35 legislation for income tax and NIC purposes. However, the parties agreed that, in this case, those differences in wording do not affect the...
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