Another high profile celebrity falls foul of HMRC’s crackdown on those attempting avoid tax by defining themselves as self employed.
What’s the whole story?
Eamonn Holmes currently presents the hugely popular ‘This Morning’ show on ITV, with his wife Ruth Langsford. He is now sixty years old and has worked in the entertainment industry for many years. As far as he’s concerned, this has always been as a self employed freelancer. And he has paid his tax liability accordingly.
But now HMRC seem to have changed the rules, putting him in the ‘employed’ category. This change of status directly effects your tax liability, resulting in this extra £250,000 tax bill.
What is IR35?
IR35 is now the name given to a couple of tax rules, including the ‘Off-payroll working rules’. They are designed to combat tax avoidance by both employers and individual taxpayers, and to protect workers’ rights.
They affect people who provide and are paid for their services through “an intermediary”, like a personal services company or limited company. Without this ‘middle man’, they would simply be employees.
According to HMRC: “The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly.”
There has been a lot of criticism around the complexity, administration and enforcement of these laws. With concern that there has been a lack of clarity and consistency.
What are the benefits to this employment position?
Hiring freelancers on contracts absolves companies from paying employers’ National Insurance Contributions (NICs) at 13.8%, employment benefits (like sick pay) and the Apprenticeship Levy at 0.5%. It puts employers in a better financial position but leaves employees without their full workers’ rights entitlement.
For the individual, being paid as a contracted freelancer means that they pay tax in a different way. It means they avoid paying employed person’s levels of NICs and income tax, which can amount to 25% of their total earnings.
What is Eamonn Holmes’ position now?
Eamonn Holmes has been receiving payment for his work on ITV through his own company Red, White and Green. Basically, ITV pay them and they pay him. With his official employment status being self employed.
He is now receiving a bill for unpaid income tax and NICs because Judge Harriet Morgan has ruled that he was not self-employed, saying: “I consider that the overall picture is that the assumed relationships between him and ITV were ones of employment.” This is on top of the tax he’s already paid.
Fellow presenter Lorraine Kelly found herself under the same HMRC spotlight not long ago, but she won her case. She argued that she was playing a version of herself on her show, as a ‘theatrical artist’.
His spokesperson said of the verdict: “Eamonn has always considered himself a self-employed freelancer and has never knowingly avoided paying taxes. He is taking the time to understand the extensive document detailing the outcome.” Very wise.
The £250,000 figure is currently an estimate, as an agreement has not yet been finalised between HMRC and Eamonn Holmes.