The First Tier Tax Tribunal has found that IR35 does not apply to Lorraine Kelly’s personal service company, a decision which has been much publicised in the Press.
HMRC were looking to collect approx. £1.2 million of income tax and national insurance from Ms Kelly who contracted to appear on the programmes, Daybreak and Lorraine, through a limited company.
IR35 applies when what are in essence employment contracts are routed through a limited company meaning that the payer doesn’t need to account for PAYE and NIC.
The Judge ruled that the relationship that Kelly had with ITV “was a contract for services and not that of employer and employee”. She did not receive staff benefits such as holiday or sick pay and was allowed to carry out other work. Overall, the Tribunal found that ITV was not employing Ms Kelly but was purchasing her brand. HMRC are considering whether or not to appeal.
The case highlights how high the tax stakes can be for those who offer their services through a limited company. HMRC have had several attempts to crack down on the perceived abuse in this area, and are continuing to up the ante, however the position remains far from clear. As a result, it is essential that any contractors or freelancers running a limited company reviews their IR 35 status carefully.
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