Former England Rugby player turned Sky Sports pundit, Stuart Barnes, has won a first-tier tax tribunal appeal over a £695,000 tax liability bill levelled against him by HM Revenue and Customs.
Barnes provided his services to Sky between 2013 and 2019 through his company S&L Barnes Limited.
The tribunal was held back in July to determine whether legislation - known as IR35 - applied to Barnes for the punditry services he provided Sky during that time.
IR35 legislation was designed to tax 'disguised' employment at a rate similar to employment, and has had varied success across tribunal cases.
The judgement of the July tribunal, published yesterday (January 19), ruled that IR35 did not apply to Barnes, meaning the Sky Sports pundit will not have to pay the almost £700,000 tax bill to HMRC.
Barnes' appeal was granted on the basis that he was in ‘business on his own account’.
This win could prove crucial in making it crystal clear to firms that forcing all contractors onto the payroll is unnecessary, not to mention expensive.Seb Maley, QdosBetween 2013 and 2019, Barnes' income from Sky made up anywhere between 33 and 61 per cent of the income flowing to his business, S&L Barnes Limited.
"The most compelling indicator is that the appellant’s [Barnes] contract with Sky was but one part of the brand, and contributed on average 60 per cent of the appellant’s income, while over £150,000 on average would also be earned from other clients," the tribunal read.
"Sky knew Barnes was in business on his own account and worked for other broadcasters. Sky welcomed that fact and wanted the world’s best commentator for the coverage.
"The second compelling indicator is the degree of autonomy Mr Barnes had in relation to how he fulfilled his role as a commentator for Sky Sports coverage."
FTAdviser understands HMRC has won more than 80 per cent of employment status and off payroll appeals heard by the tribunals and the courts since the start of 2020.
Fellow former professional rugby player, Michael Lynagh, had his application for an appeal rejected last month, leaving him with a £230,000 tax bill for breaching IR35 rules.
Earlier in the year, Sky Sports presenter Alan Parry also lost his appeal against HMRC, leaving him with a £356,000 tax bill.
Talksport host Paul Hawksbee lost his appeal last year too, seeing HMRC pick up an additional £140,000 IR35 tax liability bill.
But last year did see Radio 5 Live presenter Adrian Chiles win a seven-year long tax liability case to the tune of £1.7mn against HMRC.
In the government's "mini" Budget last September, it was announced that IR35 reform would be repealed from April 6, 2023.
Reform to the IR35 legislation, which was initially introduced in 2017 in the public sector before being rolled out in the private sector in 2021, saw the onus placed on the business contracting the services, rather than on the contractor themselves.
However, current chancellor Jeremy Hunt scrapped plans to repeal reforms to the IR35 rules.
Commenting on Barnes' recent win against HMRC, chief executive at tax consultancy Qdos, Seb Maley, said: "This is a big victory – not just for Stuart Barnes, but for freelancers, contractors and the businesses engaging these workers.
"It’s another reminder to risk-averse businesses that contractors can be engaged outside the scope of the IR35 legislation. This win could prove crucial in making it crystal clear to firms that forcing all contractors onto the payroll is unnecessary, not to mention expensive.
"That Barnes was deemed genuinely self-employed based on being in business ‘on his own account’ is important, too. There are many factors to consider when determining IR35 status – something that all parties must bear in mind."
A HMRC spokesperson said the tax collector has "noted the decision" of the tribunal and will carefully analyse this outcome before considering next steps.
They added: "The off-payroll rules ensure that people who work like employees, but through their own limited company, are taxed like employees, creating a level playing field with other workers.
"It’s our duty to ensure everyone pays the right tax under the law, regardless of wealth or status."
ruby.hinchliffe@ft.com
