Alan Parry Productions Ltd: HMRC score another off-payroll working goal
The First-tier Tribunal has held that the provision of a football commentator’s services by his personal service company was within ‘IR35’.
The First-tier Tribunal has held that the provision of a football commentator’s service
The First-tier Tribunal (FTT) held in Alan Parry Productions Ltd that the provision of an individual’s services through his Personal Service Company (PSC) fell within the Off-Payroll Working (OPW) or ‘IR35’ rules. This is notable as it is the first tribunal decision to be released since the Court of Appeal (CA) handed down its judgment in Atholl House Productions Ltd (Atholl House), which clarified how the various case law tests should be applied to establish the IR35 status of a contractor’s engagement. The FTT’s judgment clearly signaled that it was following the CA’s approach in Atholl House. This article considers key points and implications of the FTT’s decision.
Alan Parry is a football commentator who, during 2013/14 – 2018/19, provided services to a broadcaster through a PSC of which he was the sole director and majority shareholder.
The relevant tax years fell within the ‘old’ IR35 regime in that, where the rules applied, the obligation to operate PAYE and NIC on deemed employment income would always fall on the PSC, rather than on its client. However, the case law principles which determine the status of the PSC’s engagement with its client apply equally to the OPW regime that applies from 6 April 2021.
The FTT followed the established approach of:
- Considering how Mr Parry’s services were provided, including the actual contractual arrangements in place;
- Establishing what terms would have been agreed under a hypothetical contract had Mr Parry provided the services directly; and
- Applying the relevant case law tests to determine whether the hypothetical contract:
- Contained the ‘irreducible minimum’ of mutuality of obligation and control; and
- If so, whether the terms of the hypothetical contract, when viewed in light of all the relevant circumstances, were consistent with a contract of employment.
However, this case is instructive as it’s the first since the CA explained in Atholl House: (a) that, at Stage 2, consideration should be limited to actual contractual terms, rather than how contracts operate day-to-day (as is required for employment law purposes, further to Autoclenz); and (b) how, at Stage 3, the established case law which variously addresses mutuality of obligation, personal service, control and ‘business on own account’ is compatible/consistent in providing a framework through which employment tax status should be considered.
What did the FTT decide?
The FTT found that the hypothetical contracts between Alan Parry and the broadcaster contained mutuality of obligation as, in summary: (a) the broadcaster was obliged to pay remuneration to Mr Parry over the course of the contracts; and (b) the ‘dominant feature’ of the contracts was one of personal performance by Mr Parry.
Additionally, the FTT found that the broadcaster determined where and when Mr Parry provided his services, what he did in terms of commentating, interviewing, or presenting, and that it had ‘ultimate authority’ to direct how he provided his services. It therefore had the requisite level of control for an employment relationship.
On this basis, the FTT held that hypothetical contracts contained the ‘irreducible minimum’ for an employment relationship to exist.
Additionally, the FTT determined that Mr Parry was not carrying on a business on his own account as, amongst other factors, he had provided services to the broadcaster for a considerable time, most of his income in the relevant years derived from that relationship, the broadcaster could prevent Mr Parry being associated with its competitors, and he took no meaningful commercial risk.
Therefore, the FTT concluded that the terms of the hypothetical contracts, considering all the relevant circumstances, were on balance consistent with employment.
Why does this decision matter?
The FTT took care to indicate that its approach followed that set out by the CA in Atholl House by:
- Affirming that, in determining the contractual terms at Stage 2, Autoclenz (whereby for employment law purposes regard is had to the way the work is done day-to-day as well as the actual contractual terms) does not apply for tax purposes – rather that “the well-established rules of interpretation of contracts in general apply…without regard to the fact that the contractual arrangements relate to the context of employment”;
- Starting from the position that mutuality of obligation and control do not create a presumption of employment when assessing whether the hypothetical contract is consistent with employment – although they are a necessary pre-requisite to employment it is still necessary to view the position with an open mind when considering other factors; and
- Considering the extent of mutuality of obligation and control, as well as factors beyond the express or implied terms of the hypothetical contract, when conducting that assessment.
The FTT’s decision underlines the importance of organisations reflecting the CA’s decision in Atholl House in their OPW status determination and dispute resolution processes to demonstrate to HMRC that they take ‘reasonable care’ to comply with their obligations. This is particularly important given the end of HMRC’s ‘light touch’ enforcement regime.