Sky presenter loses £281k case over IR35 status
A Sky sports presenter has lost a case at the First Tier Tribunal over his working status and whether his contract with Sky fell outside the IR35 rules
Dave Clark worked as a freelance Sky presenter and commentator, primarily working on darts coverage for the broadcaster.
The First Tier Tribunal has ruled that Clark was effectively an employee of Sky and was therefore liable for income tax and national insurance contributions, estimating that a tax bill of £281,084.48 was now due. This related to tax liabilities from 2012 to 2018.
The case involved the presenter’s personal service company, Little Piece of Paradise (LPPL), and focused on whether the presenter should have been regarded as an employee from a tax perspective if he was engaged under a contract directly with the television company, taking into account the principles of mutuality of obligation.
Every two years, Clark signed a new agreement with Sky to provide ad hoc broadcasting services, primarily as a presenter and usually for around 64 days a year. The Sky contract with Little Piece of Paradise stated that Clark would provide the following services: ‘The company shall provide the services of the personnel as a commentator, presenter, interviewer, guest, or other participant in the making of any editorial, programme or video whether in vision or audio and whether in a studio or on location, live or recorded during the assignment.’
He was paid an annual fee of between £155,000 to £160,000 for his services.
There was also a clause in the contract covering tax and liabilities, which stated: ‘Clause 9.1 of each contract contained express provisions to set out parties’ intentions as the effect to be given by the agreement, whereby: ‘the parties declare that, during the continuance of the agreement, [Mr Clark] shall be an employee or sub-contractor of the company’, and that LPPL ‘shall be solely responsible for all matters relating to [Mr Clark’s] employment/engagement.’
Clark was given overall control of his presenting duties, which ‘involved him presenting in his own words’, Sky said. He had to make his own notes and scripts for certain sections and reference to them while on-air, but large sections of the programme would be ad-lib’.
There were terms which rendered no mutuality of obligation. If services or work were not provided there was no obligation under the contract to make payment.
Clark’s legal team argued that ‘no element of the Contract requires LPPL to accept any work offered, and although the Contract may be terminated under Clause 5.1(a) for non-performance, this underlines the lack of mutuality of obligation’.
In terms of the working arrangements, Clark was not treated as a staff member and did not possess any pass for entry into Sky premises. If a meeting was arranged by Sky for Clark to attend, he would receive an email with details for access. To gain access, he would need to either present the email at the reception, or scan the QR code, or enter the booking reference at the ‘check-in stands’.
Clark enjoyed no employment related benefits and protection such as: sick and holiday pay, paternity or similar leave entitlements, pension or redundancy entitlement, protection against unfair dismissal or third party liability, no access to Sky offices, or training, and no requirement to operate within the staff handbook.
HMRC refuted Clark’s argument that there was no mutuality of obligation.
The tax authority’s lawyer argued: ‘There would have been sufficient mutuality of obligation between Mr Clark and Sky during the currency of each of the Contracts. Mr Clark was required to personally perform the services as and when required by Sky. In practice, Sky required him to present its coverage of PDC events.
‘Even though it appears Sky had no obligation to provide continuous work, there was a contractual requirement on Sky to provide payment of £150,000 per year in return for the services of Mr Clark, akin to payment of a retainer. If Mr Clark had refused or failed to perform the services personally when required to do so, he would have been in breach of contract.’
HMRC also argued that Clark’s income was predominantly paid by Sky, ‘as the income received from Mr Clark’s services for Sky was over 98% of the appellant’s total income’ and as a result ‘Mr Clark was therefore economically dependent on Sky’. This appears to be an unusual argument for HMRC to take as Clark only spent about a fifth of his working year presenting for Sky.
However, the tribunal felt that the contract should be treated as employment as Clark was paid on a monthly basis regardless of whether he had work every month.
‘In our view, while the performance of the Services by Mr Clark was intermittent, with breaks in work engagements being punctuated by periods of work, the irreducible minimum remained in force under the relevant Contract which served as an umbrella contract between the parties,’ the tribunal stated,’ the ruling stated.
The judges added: ‘We find therefore that mutuality of obligation existed between Sky and Mr Clark for each contractual period. Since each contract was renewed on its expiry to provide a continuum for the six years in question, the state of affairs as regards mutuality of obligation obtained for the entire duration of the relevant period. We are not satisfied that the appellant has advanced any valid submissions, either on the law or on the facts, to displace our conclusion.’
Ruling against Clark and dismissing the appeal, the judges concluded: ‘We are satisfied that no factors existed which were inconsistent with the affirmative conclusion that the contractual arrangements between Sky and Mr Clark would have been a contract of service for the duration of the entire relevant period from 1 August 2012 to 31 July 2018 for the purposes of the IR35 legislation.’
Qdos CEO, Seb Maley, commented: ‘The steady stream of IR35 tribunals recently shows that IR35 is top of the agenda for HMRC, who now has the remit to pursue not only contractors but also businesses for staggering tax bills. Dave Clark is another victim of the complex IR35 legislation.
‘A high profile victory for HMRC may concern contractors and businesses, but the fact of the matter is that Clark’s working relationship with Sky – like many other presenters – was quite different to ones held by typical contractors. It’s also possible that Clark may appeal the case again and overturn this decision.’
In April 2020 Sky changed its contract arrangements with freelance presenters as a result of new off-payroll working regulations. This resulted in presenters being hired directly by the broadcaster as staff. Sky correspondence stated that ‘the assessment … is restrictive and means in practice, that nearly all on-air talent currently engaged via PSCs will no longer qualify as self-employed. Therefore, we have taken the decision that going forward we will no longer be able to engage on-air talent through PSCs or sole traders. The change will take effect from the end of your current PSC arrangement’.
Story by Sara White from Accountancy Daily