Rugby Pundit Stuart Barnes Loses circa £700,000 IR35 Appeal: A Close Call with Far-Reaching Implications
Former rugby player and Sky Sports pundit Stuart Barnes has lost his appeal at the Upper Tribunal, resulting in a substantial tax bill of approximately £700,000. This decision overturned a previous First-Tier Tribunal verdict that had been in his favour.
What happened and what can you learn from the case?
The Upper Tribunal determined that Barnes’s working relationship with Sky Sports between 2013 and 2019 fell within the IR35 legislation, indicating he was operating as a ‘disguised employee’ rather than a genuine freelancer.
In the judgment, Judge Thomas Scott and Judge Mark Baldwin stated the reasons for their decision:
- Length of the Contract: The extended duration of the contract suggested an employment-like arrangement.
- No Right of Substitution: The absence of a right to send a substitute to fulfil his duties further pointed toward employment status.
- Exclusivity and Right of First Call: Sky’s exclusive right to call on Barnes’s services for a significant portion of the year strengthened the case for employment.
- Lack of Financial Risk: The absence of any substantial financial risk on Barnes’s part was another factor in the decision.
These factors, in the judges’ view, outweighed other considerations such as Barnes’s ability to exploit his work product and the fact that he had other business activities.
Expert Commentary
Seb Maley, CEO of Qdos, emphasised the complexity of IR35 and the importance of compliance. He noted that Barnes’s initial victory at the First-Tier Tribunal was based on his being seen as “in business on his own account.” However, the Upper Tribunal focused on a different set of factors, ultimately leading to a different outcome.
“There are certainly lessons to be learned from this case, both for freelancers and businesses engaging them,” said Maley. Continuing he said, “Rigorous IR35 determinations must be made at the start of a working relationship, while IR35 status should be continually reviewed as this relationship evolves. By no means is it a tick-box exercise.”
Maley said Barnes is the latest in a long line of high-profile individuals targeted in recent years by HMRC for allegedly working as disguised employees – a number of whom have been engaged by Sky.
Dave Chaplin, CEO of IR35 Shield, who attended the Upper Tribunal hearing, offered further insights:
“The Stuart Barnes case was a close call that could have gone either way… HMRC’s second ground of appeal, which was more controversial, did succeed. This ground focused on how the First-Tier Tribunal approached the third stage of the Ready Mixed Concrete test and which factors it considered relevant to go into the mix for the full evaluation. The surprising element was that the UT chose to interfere with the evaluative nature of a multi-factorial decision by a First-tier tribunal.”
Chaplin also pointed out the implications of this ruling for other individuals who have provided services to Sky TV: “This ruling now means that none of the cases involving individuals providing services to Sky TV have succeeded at the tax tribunal. The Sky boilerplate contracts used by all these individuals contained considerable onerous provisions, particularly around control, which did not necessarily reflect the level of control exercised in reality. However, as we’ve seen repeatedly in IR35 cases, contractual provisions are central when determining employment status for tax purposes.
“This case underscores the need for freelancers and their clients to ensure that their contracts and working practices accurately reflect the true nature of their relationship.”
Points to ponder
The Stuart Barnes case serves as a stark reminder of the complexities and potential financial implications of IR35. It underscores the importance of careful IR35 compliance for both freelancers and the businesses that engage them. The ruling also highlights the potential risks associated with using standardised contracts that may not accurately reflect the actual working relationship.
