HMRC successfully appeals IR35 case worth £140,000

28 April 2022

Her Majesty’s Revenue and Customs (HMRC) has emerged from the Court of Appeals (CoA) having the appeal against them dismissed on 26 April 2022.

Paul Hawksbee, a presenter for TalkSport Radio, lost the appeal which relates to the tax years 2012/13 to 2014/15 and is worth over £140,000 in tax and national insurance. The First Tier Tribunal (FTT) found in favour of Hawksbee, HMRC appealed and this was upheld in the Upper Tribunal (UT).

Hawksbee was allowed to appeal and did so, however when looking at factors such as mutuality of obligation, the CoA concluded that the decision made by the upper tribunal was correct. The judgement details the reasonings behind the decision.

On the same day, the CoA referred another IR35 case back to the UT after finding that the rules around IR35 were not applied correctly. Kaye Adams, a freelancer engaging with the BBC, had her case appealed by HMRC after she succeeded in the FTT and UT. The COA saw issues with the ‘hypothetical contracts’ between Adams and the BBC.

Of note in the judgement; Sir David Richards, a CoA judge, remarked that “it would certainly be desirable if, there were one clear test or approach to determining whether a person was an employee. Important legal consequences flow from this determination.

The use and efficacy of the Check Employment Status for Tax (CEST) tool has always been a controversial subject for payroll professionals when discussing off-payroll working and its application. With the tool taking into consideration many factors and past case law, it is far from a simple test. The introduction of one clear test could have reduced the number of expensive and lengthy legal battles HMRC has recently been involved in.

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