The former rugby player lost his six-year tribunal this week (28 August) after HMRC ruled that he should have been classed as an employee due to his working arrangements with Sky Sports.
Seb Maley, CEO of IR35 compliance firm Qdos, told HR magazine: “Barnes was deemed to have been wrongly working outside of IR35 for a number of reasons.
“This included Barnes not having the right to provide a substitute, which is one of the hallmarks of an inside IR35 engagement. Looked at differently, this is reflective of an employment relationship.
“There was also the exclusivity that Sky held over Barnes. Again, this is much more akin to an employment relationship as opposed to self-employment.”
A first-tier tribunal previously decided that Barnes had been rightly classified under IR35 as a freelancer, however HMRC was able to successfully appeal the case as its representatives argued that the tribunal had not considered relevant factors in Barnes’ working arrangements at Sky.
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The upper-tier tribunal looked at the length of Barnes’ service at Sky, that he was not allowed to call on a substitute, and that Sky had first right of call on his services for a significant portion of the year.
The tribunal reconsidered Barnes’ working arrangements under a hypothetical contract and concluded that the relationship should have been one of employment.
Employers should ensure that contracts accurately reflect the nature of working arrangements for freelancers or contractors they engage, explained Dave Chaplin, CEO of compliance firm IR35 Shield.
Speaking to HR magazine, he said: “Firms should engage with specialist contract lawyers and IR35 experts when drafting contractual terms, rather than just downloading a cheap or free template contract from the internet.
“We often see traditional agency-based contracts used, which are wholly unsuitable, since they are for the supply of individuals, and not for the supply of services by contractors using limited companies.
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“Another common problem is that non-specialist boilerplate contracts often contain gaps. Given the Court of Appeal has stated that the contract is 'central to the enquiry', it beggars belief that some firms are not giving them the focus they require.”
Barnes’ case follows tribunals into media personalities’ IR35 status, including another Sky Sports pundit, Neil McCann, who earlier this year was ordered to pay £210,000 in tax underpayments.
Maley added that employers should regularly review their contracts under IR35 legislation.
He continued: “Regularly review contracts from an IR35 perspective. As a rule of thumb, we recommend that a contractor should have their IR35 status reassessed every six months, given how quickly a working relationship can evolve.
“Needless to say, if changes are actively made to a contractor’s working practices – in other words, how they provide their service day in day out – an IR35 assessment is a must.”
