Photo source: BBC Programmes Radio 2/Jeremy Vine
Jeremy Vine, the BBC presenter, is fighting a legal battle with HMRC over alleged unpaid taxes, potentially impacting the classification of freelance work under IR35 rules. Legal and IR35 experts are speaking out about HMRC’s track record of stringing people along through decades-long court battles of uncertainty and great cost to the contractor and taxpayers
Jeremy Vine, the well-known BBC presenter, is embroiled in a legal battle with HM Revenue and Customs (HMRC) over alleged unpaid taxes. This development places Vine alongside other high-profile figures such as Gary Lineker and Adrian Chiles, who have also faced scrutiny under IR35. The outcome of Vine’s case could have significant implications, not only for him but also for other freelancers and contractors operating in similar circumstances.
The latest dispute centres on whether Vine should have been classified as an employee rather than a contractor during his work for the BBC between 2013 and 2015, which includes presenting shows like “Eggheads” and “Points of View,” as well as coverage of the 2015 general election, it has been reported by The Express.
This case falls under the IR35 legislation, which is designed to prevent tax avoidance by so-called “disguised employees” who operate through limited companies but should be taxed as employees. Vine, who has been in dispute with HMRC since 2018, argues that he operated as a contractor and therefore should be taxed as self-employed. A preliminary hearing in June saw Vine’s attempt to challenge HMRC’s right to pursue the case rejected by the judge, leading the case to move forward to the First-tier Tribunal.
“IR35 legislation needs changing”
Lee McIntyre-Hamilton, an employment tax partner at Keystone Law, criticised the current IR35 rules for their inadequacy in determining employment status in today’s work environment. He explained, in an FT Adviser report, “The UK employment status tests are based on case law going back many decades and are often nuanced, unclear, and subjective in too many cases.”
The Jeremy Vine case is essentially a story about how long these tax cases are taking. It is not right that someone is kept in the dark without tax certainty over engagements entered into over 10 years ago.
Dave Chaplin, CEO of IR35 compliance firm IR35 Shield
McIntyre-Hamilton pointed out that the employment status tests for employment law and employment rights purposes differ in some respects from those for tax purposes, leading to further confusion.
He emphasised, “Not for the first time, we have seen such cases last many years and the fact that even the courts can’t decide on the correct application of the law in a number of cases involving employment status ought to be a clear warning that the law needs changing.”
IR35 court cases should not a decade or more
Commenting on the case, Dave Chaplin, CEO of IR35 compliance firm IR35 Shield said: “The Jeremy Vine case is essentially a story about how long these tax cases are taking. It is not right that someone is kept in the dark without tax certainty over engagements entered into over 10 years ago.
“The preliminary hearing was to work out if the case needed a preliminary hearing and the Judge said no. The tax tribunal has not yet heard the substantive appeal, and if Vine wins, the strong likelihood is that HMRC would appeal, because they have a track record of appealing – having appealed all but one in recent years when they lose.
“HMRC is usually permitted to appeal to the upper tier, who could then remit back to the first-tier. This case could drag on for another three years and that is simply not right. Jeremy Vine could then join the other high profile media celebrities like Adrian Chiles and Kaye Adams in the IR35 decade club.”
When a contractor is taken to court by HMRC over an IR35 issue, it can involve significant personal and financial costs.
Here are the key aspects and potential costs;
Personal and Financial Costs of Going to Court:
- Legal Fees:
- Contractors need to hire legal representation, which can be costly. This includes fees for solicitors and barristers, which can accumulate quickly over the course of the case
- Tax Liabilities:
- If HMRC wins, the contractor might owe back taxes, National Insurance Contributions (NICs), interest, and penalties for the period under review. This can amount to a significant sum, often spanning several years , according to Contractor Weekly
- Stress and Time:
- The process is typically lengthy and stressful. Preparing for the case, gathering evidence, and attending court hearings can take a toll on the contractor’s personal and professional life, as reported by AccountingWEB UK and Recruiter highlighting previous cases.
- Potential for Retroactive Claims:
- HMRC often investigates contracts held before the IR35 reforms, which means that contractors might be liable for past engagements, not just current or recent ones.
- Burden of Proof:
- The contractor has the burden of proof to demonstrate that they are genuinely self-employed. This involves collecting extensive evidence, which can be challenging, especially for historic cases
Specific Examples:
- Gary Lineker’s Case:
- Dave Chaplin highlighted the significant financial and emotional strain Gary Lineker faced during his IR35 investigation by HMRC. Despite the high costs and stress, Lineker eventually won, underscoring the importance of robust defence but also the heavy burden it places on individuals
- Neil McCann’s Case:
- In this case, issues such as the difficulty in obtaining witness evidence and the complexity of interpreting the mutuality of obligation and control were evident. McCann’s defence faced challenges due to the historic nature of the contracts and the lack of available witnesses, demonstrating the intricate and often prohibitive nature of defending against HMRC’s claims, it was reported by AccountingWEB UK
Preemptive Measures:
Chaplin and other IR35 specialists often suggest contractors should maintain detailed records and robust contracts that clearly outline their self-employment status to preemptively defend against potential IR35 claims.
This includes ensuring that contracts reflect the true nature of the engagement and collecting evidence throughout the contract period, rather than retrospectively.
In summary, being taken to court by HMRC over IR35 issues can be a costly, stressful, and complex process for contractors. It highlights the importance of maintaining clear, comprehensive documentation and being prepared for a rigorous defence if challenged by HMRC. Do not rely on your client to ensure all the above is correct. If in doubt, contact a company such as Qdos or IR35 Shield to examine the contract and request any changes to reflect how you want to work with said client.
