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ITV’s This Morning presenter, Eamonn Holmes, is under the spotlight after HMRC brings his IR35 status into question.

HM Revenue & Customs are taking a closer look at the earnings of Eamonn Holmes’ Limited Company, Red White and Green Ltd, from the past seven years.

The television host is awaiting a decision which will rule if his limited company was in breach of IR35 legislation, or compliant.

Eamonn said to The Mail on Sunday,

They’ve reinvented the rules.

“I am the test case. If they win against me they will go after everyone else, everyone. Ant and Dec will be next.

“The country is broke and they are coming to get us. I was in court in Central London for a week in June. I’ve been freelance for 28 years and that’s been okay. Now they’ve said it’s not okay.”

The ITV presenter awaits a decision for his PSC.

The news comes shortly after BBC presenter, Christa Ackroyd, was issued a £420k tax bill after HMRC ruled that her contract was caught by IR35.

Ackroyd who lost the IR35 case against HMRC is appealing the decision after being ordered to pay £419,000.

What is IR35?

IR35 is a legislative measure brought in by the Government to identify ‘disguised employees’. These are people who are effectively employees but work through a limited company to take advantage of the tax benefits. 

To determine whether you are caught by IR35, the working practices must be examined and the contract should also reflect the working practices. The following are some of the points that should be considered:

Control

This is one of the main tests that would be done to determine whether the working is caught by IR35. 

Those not caught by IR35 will have true control over when and how they work rather than this being decided by the end client. If the end client was to specify the days the contractor should work, this could point towards employment and therefore being caught by IR35.

Other specifics that could be looked at under control could be whether start and finish times appear in the contract. If they were included, this could point towards the end client having control.

Mutuality of Obligation

This is where there is an obligation between the worker and the client of work being completed and further work being offered.

Where this is in place, this would indicate employment and therefore caught by IR35. A contractor who is not caught by IR35 should not have an obligation to carry out further work, they should ideally work on a contract for services basis where there a specific project. 

Substitution

This involves looking at who completes the work if the contractor is unable to do so.

If the worker can genuinely choose who completes the work if they cannot, then this is likely to be outside of IR35. If the worker has no say and it is the client who decides, this could be an indication of employment.

Other Considerations

If the worker is part of the company and behaves like an employee, this would indicate as being caught by IR35. For example, this could include the worker appearing on organisation charts and attending team meetings with other employees.

If the worker uses their own equipment rather than the client’s equipment, this could also be an indication that the contract is not caught by IR35.

How does IR35 impact the worker? 

If not caught by IR35, the worker gets the benefit of choosing a tax efficient salary from the limited company and they can then top up their income by declaring dividends from any company profits. 

If you are inside IR35, you will be effectively treated as an employee and pay income tax and national insurance contributions on the majority of the company income. The worker will not normally have employment rights. 

If you operate under an umbrella company, like Gorilla Umbrella, then all of these tax contributions will be sent straight to HMRC on your behalf. 

Each time you take on a new contract, you’ll need to make an assessment as to whether you’re inside or outside of IR35.

If you’re contracting for a public-sector body, the rules will be different for you. 

How can I check my IR35 status? 

If you’re unsure on what your IR35 status is, there are a handful of ways that can help determine your status.

Firstly, the government has an online tool which can give you an instant online answer. The CEST tool, ‘check employment status for tax’ can be used to find out if you’re a worker or if you should be classed as employed or self-employed for tax purposes.

The tool will give HMRC’s view on the following: 

  • if intermediaries legislation (IR35) applies to your contract
  • if the off-payroll working in the public sector rules apply to your contract
  • if a worker should pay tax through PAYE 

In order to use this service, you’ll need the following to hand:

  • the worker’s responsibilities
  • the decision maker for what work needs doing
  • the decision maker for when, where and how the work’s done
  • how the worker will be paid
  • benefits included or reimbursement for expense

An alternative way of determining your IR35 status is by using an IR35 specialist to carry out a focused review.

Introducing Larsen Howie

We work with Larsen Howie, the specialist IR35 Contract Review provider for contractors, freelancers and consultants to deliver a competitively priced service to clients of Gorilla Accounting at a competitive price.

Through Gorilla Accounting, you’ll have the option to carry out an Assessment, Full Review, a Refresher Review or Convert Review. For more information, take a look at the price guide here. 

If you would like to speak to a member of the Gorilla Accounting team, call 0330 024 0406 or email info@gorillaaccounting.com.

 

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