Fospero works for a number of different broadcasters and corporate clients, but this case centred on a two-year period when she had contracts to work primarily as a presenter on ITV shows including Daybreak and Lorraine.

HMRC argued at the First Tier Tribunal (FTT) that Fospero was not a contractor but employed, and was therefore liable for £80,000 in unpaid taxes and national insurance contributions (NICs) covering tax years 2012-13 and 2013-14.  The amount of PAYE income tax in dispute was £80,770.96.  

The case hung on how IR35 legislation applied to the arrangements between Fospero’s personal services company (PSC), Canal Street, and ITV; effectively whether payments received by Canal Street from ITV should have been treated for tax and NICs purposes as if they were employment income or earnings for Fospero, rather than the liability of her PSC [Canal Street Productions Limited v The Commissioners for Her Majesty’s Revenue & Customs [2019] UKFTT 647 (TC)].

The tribunal heard that Fospero had set up her PSC in 2002 when she started working on a contract basis for a number of broadcasters, including the BBC, Sky and ITV.

The tax years in dispute covered 2012 to 2014, when she was working primarily for ITV as a guest presenter or news presenter on Daybreak and Lorraine.

Contracts

In making his ruling, tribunal judge Ashley Greenbank referred to three separate agreements, described as the framework agreements, which set out the working arrangements between Canal Street and ITV. This included a letter agreement from ITV which stated: ‘This agreement (the “Agreement”) sets out the terms upon which you have agreed to provide the services of the Individual on a first call basis during the Term for the Programme referred to below, which we intend, but do not undertake, to produce.’

The TV programmes were Lorraine and Daybreak, and the contract included a restriction from working on any competitive programmes during morning hours between 6am and 1pm when the shows were broadcast. This restriction covered Fospero ‘as a presenter, reporter or contributor to any television or other audio visual programme which is broadcast and/or transmitted in the UK’.

Although there were a number of contract changes, it appears that at all times Fospero was free to pursue other broadcast opportunities as long as she ‘sought the approval of ITV before engaging in any new commercial activities’ and must be ‘available on a “first-call basis”’.

The first contract also stated: ‘For the avoidance of doubt, [we] anticipate requiring the services of the Individual for approximately 20 (twenty) News Presenter Appearances per annum or pro rata for any incomplete week or month or year of the Term.  You acknowledge that the Individual’s participation in the Programme throughout the Term in the manner set out above is integral to the Programme and a material term of the Agreement.’

HMRC’s lawyer argued that the 20 days indicated a guarantee of specific work, but the judge rejected this, stating ‘the reference to 20 days of anticipated work in the First Contract was nothing more than that. It expressed a hope and expectation that ITV would be in a position to offer work and that Canal Street would accept it’.

Control

On the important issue of control, the judge said that ‘irrespective of the nature of the engagement, Ms Fospero’s evidence, which was not challenged, was that she would often undertake several hours of preparation for an engagement… however, when, where and even if she undertook that preparation was not dictated by ITV or governed by the framework agreements’.

Greenbank said that ‘ITV would have retained sufficient control over the performance of the services within the individual engagements for the arrangements to be a contract of service provided that the arrangements as a whole [we]re consistent with that conclusion.  ITV had a right to control the performance so far as there was any scope for control by ITV’. 

Mutuality of obligation

Referring to the mutuality of obligation and whether contractual engagements could be considered as employment contracts, the judge referred to the judgment of Elias LJ in the Court of Appeal in Quashie, stating that it was ‘the most complete statement of the principles which should be applied in these circumstances’.

In his ruling, he stated that ‘there would be no mutuality of work-related obligation between the engagements: Ms Fospero would have no guarantee of work and would be under no obligation to perform work if it was offered. 

‘She would be engaged on an assignment by assignment basis. Those assignments would be very short term, many involving only a matter of hours in the studio, albeit some requiring several hours of preparation in advance. 

‘Although there would be a hope and expectation of further work under the arrangements, for the most part, when she finished work on a particular engagement, Ms Fospero would have no assurance that she would be offered further work.’

Contractual arrangements

He dismissed HMRC’s argument, stating that ‘notwithstanding these continuing contractual arrangements, in my view, the circumstances of Ms Fospero’s case justify the inference that she would be working as an independent contractor rather than an employee under the hypothetical contract’.  

‘The contractual obligations which continued between the engagements would not, to my mind, detract from the inference that Ms Fospero was self-employed,’ he added.

Although she was only working for ITV over the two-year period, the tribunal accepted that Fospero’s agents, Roar, were actively seeking other work for her during this time.

Greenbank added: ‘It is also true that, in the period in question, ITV was an important client of the business but Ms Fospero’s business would not be the first small business that was significantly exposed to a particular client in a particular period.’

‘For these reasons, to my mind, it would [be] artificial to isolate the relationship with ITV and that period in time from the remainder of the business carried on by Ms Fospero as would be required to meet the test in s49(1)(c)(i) ITEPA’ [Income Tax (Earnings and Pensions) Act 2003].

There were also clear distinctions between Fospero’s treatment as a contract presenter and employed ITV presenters who were provided with laptops, had ITV email addresses, had workstations or rooms at ITV’s studios, and were provided with more generous expenses allowances’. Fospero had none of these staff benefits.

The judge ruled in favour of Fospero, stating: ‘If I stand back from the detailed picture that is painted by all of the facts and circumstances, and view the picture as a whole, I arrive at the same conclusion.

‘In the period in question, Ms Fospero was engaged, through Canal Street, in a separate business, she worked under a series of short-term engagements for ITV, she had no guarantee of further work outside those engagements and ITV had no obligation to provide any work. 

‘All of these factors point towards Ms Fospero being regarded as self-employed and not an employee even if she had been engaged directly by ITV.’

HMRC has the right to appeal the ruling. An HMRC spokesperson told Accountancy Daily: 'We are considering an appeal.'

This is the latest loss for HMRC in a spate of IR35 cases which have been going through the tax tribunals. The only recent exception was the Christa Ackroyd case, which went to appeal at the Upper Tribunal, and HMRC won.

David Goldberg QC and Laura Inglis, counsel, H W Fisher & Company represented Canal Street Productions.

FTT ruling,Canal Street Productions Limited v The Commissioners for Her Majesty’s Revenue & Customs [2019] UKFTT 647 (TC)

By Sara White