Lorraine Kelly Court Ruling
A judge recently ruled that TV presenter Lorraine Kelly was outside IR35. That’s despite HMRC deciding that she was inside IR35. The main reasons that the Lorraine Kelly court ruling showed her to be outside IR35 are as follows:-
- Mutuality of Obligation
- Supervision Direction and Control
- The Right of Substitution
- Employee Benefits
- Financial Risk
- Part and parcel of the Organisation
Mutuality of Obligation
That ITV was contracted to pay Loraine for 42 weeks a year work did show some measure of Mutuality of Obligation. However, the judge ruled that this was not a crucial factor.
Supervision, Direction and Control
HMRC argued that the Program Editor had control over what Lorraine said and did. However, the judge ruled that this control was minimal. Lorraine had a fair bit of freedom to act and say what she wanted.
The Right of Substitution
Kelly only provided her services for 42 weeks of the year. That’s even though he show went out every week of the year. When deciding who would substitute for the other 10 weeks, Lorraine had a big say in who the substitute would be.
ITV could agree with the substitute or turn the substitute down.
Kelly was not entitled to:-
- Sick Pay
- Holiday Pay
- Pension Contributions
This pointed strongly to her not being an employee of ITV. All other ITV employees were entitled to these benefits.
HMRC argued that as Lorraine could not increase her profits from providing her services to ITV she took no financial risk. The judge ruled that the opposite was true. If the project was cancelled she would lose out whereas a permanent employee would be give work elsewhere. Also, she had the financial risk from sickness. An employee would not lose income from being sick whereas Lorraine would do.
Part and Parcel of the Organisation
HMRC argued that Lorraine was part and parcel of the organisation, i.e. ITV. However, the judge said that she appeared in other TV shows and did work on behalf of her fashion line. ITV would not allow employees to do this. So, this further showed that Lorraine was outside the organisation. She wasn’t an employee.
Lorraine Kelly Verdict as it affects Contractors
The Lorraine Kelly Court ruling is a really good verdict for all contractors. The fact that the judge decided that it wasn’t even close is excellent news. Much of the above can be true of all contractors, e.g. the financial risk they have from projects being cancelled or from falling ill.
This is a major blow to HMRC prior to rolling out their public sector IR35 rule changes to the private sector too in April 2020.
One wonders how HMRC can create a definitive IR35 test (which they claim their CEST is) when they clearly don’t understand IR35 themselves – or they wouldn’t keep losing court cases over it.
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