In 2018, HMRC claimed that McCann should have been classified as an employee, rather than a freelancer, in contracts with Sky Sports for his punditry services between 2013 and 2018.
McCann, who was working under his limited company, McCann Media Limited (MML), contested the claim and argued that he provided his services in a genuine freelance capacity. This appeal was dismissed in 2022.
In October 2023, McCann escalated this appeal to the Upper Tier Tribunal, but the appeal was dismissed on 5 April 2024 as the tribunal found that McCann’s contractual relationship with Sky Sports was consistent with employment.
McCann is among other presenters who have been targeted by HMRC under IR35, including Gary Lineker, Eamonn Holmes, Kaye Adams and Lorraine Kelly.
Read more: Gary Lineker wins appeal against £4.9 million IR35 bill
Seb Maley, CEO of tax consultancy Qdos, told HR magazine that this case showed the importance of correctly classifying workers under IR35.
He said: “In this instance, Neil McCann is liable for the £210,000 but under the off-payroll working rules, businesses will be liable for the tax liability.
“Organisations with dozens or hundreds of contractors – which is fairly common – could be hit with tax liabilities that run into millions, in the event they incorrectly determine the IR35 status of contractors.
“But rather than scaring businesses into knee-jerk decisions, such as banning contractors altogether, this case and the liabilities involved show how important it is to make well-informed IR35 status determinations.”
Maley noted that employers should not take a blanket approach to classifying workers. He added: “Determinations should ideally be made on a case-by-case basis, while HMRC’s IR35 tool, CEST, shouldn’t be relied upon. Along with failing to take into account all aspects of the IR35 legislation, it can’t deliver a determination 100% of the time and has even been dismissed in a tribunal.”
Read more: IR35 offset ignites confidence to hire contractors, says HR
Dave Chaplin, CEO of IR35 compliance firm IR35 Shield, explained that employers should seek expertise when deciding freelancers’ tax status.
Speaking to HR magazine, he said: “Firms without in-house expertise should get expert help. HMRC takes three to five years to train their own officers on this law and it’s not something that can be learnt quickly.
“IR35 experts with experience all the way to tax tribunals are best placed to advise on IR35 matters, to help ensure firms don’t get status wrong.
“What all these cases demonstrate is that firms should properly assess status and retain evidence to then satisfy any HMRC inspector.”
This comes as amendments to IR35 legislation came into effect on 6 April 2024, that ended the double taxation employers could face if they incorrectly classified workers.
Maley commented: “The recent changes to the off-payroll working rules, which saw the end of the so-called double taxation, will mean that if a business is issued a tax bill for non-compliance, HMRC will offset the amount of tax that a contractor has already paid on the engagement.
“Needless to say, though, accurate status determinations remain paramount, given the sums involved.”
