Phil Thompson originally lost his case in 2023 at the first-tier tribunal (FTT); however, he appealed the ruling on four legal grounds, including the interpretation of his contract.
The upper tribunal dismissed Thompson’s appeal on Monday (17 March) and stated that there was “no material error of law in the FTT’s decision".
It is crucial that employers and HR leaders in businesses engaging contractors are confident that they are complying with off-payroll working rules, stated Seb Maley, CEO of contract insurances provider Qdos.
He told HR magazine: “[These rules] are complex, often misinterpreted and misapplied, which can result in eye-watering tax liabilities.
“Generally speaking, businesses need to ensure they carry out well-informed, rigorous IR35 status reviews. IR35 status is based on a multitude of factors, which is why thorough assessments that focus on both the contract itself and the working practices of the contractor, are essential.”
Read more: Recruitment agency to pay £37k for incorrect IR35 deductions
Employers should also ensure that the contracts they use accurately reflect the employee’ work, added Nick Bustin, director of employment tax at accountancy firm HaysMac.
Speaking to HR magazine, he said: “Businesses should ensure that the contracts they use accurately reflect the nature of the work being provided, and clearly set out roles, responsibilities, and the level of control the contractor has in respect of the services being provided.
“One of the grounds of appeal was the level of control Sky had in terms of the provision of his services. The UTT reached the same conclusion as the FTT: Sky had a measurable say over how his services were provided.”
Bustin also encourages employers to regularly review contractor engagements and make use of HMRC’s Check Employment Status Tool (CEST), which can be used to determine whether, for a particular contract, the off-payroll working rules apply.
The decision to deny Thompson’s case comes as multiple other Sky presenters’ appeals have been denied, including Dave Clark and Alan Parry. Former Manchester United footballer Bryan Robson also lost his IR35 appeal last year.
Read more: IR35 backlash continues as Spring Budget nears
One interesting part of Thompson’s case is that the UTT decided that the FTT had not made an error in coming to their conclusion, according to Rebecca Seeley-Harris, employment at tax specialist at consultancy Re:Legal Consulting.
She told HR magazine: “With so many cases being appealed because the tribunal case made a mistake, it’s refreshing to see that the FTT got it right.”
Seeley-Harris added: "The main trend is that HMRC is pursuing, almost exclusively, TV presenters. So, the cases that are coming through at the moment are historic cases involving the old IR35 regime.
“There haven’t been any cases on the new off-payroll working legislation that came into the private sector in 2021, where it will be the business or client that is liable for the tax. That not to say that HMRC is not conducting informal investigations in this area.”
Paul Newsham, CEO of the Payroll Compliance Authority, a not-for-profit accreditor in the umbrella company market, echoed this.
Speaking to HR magazine, he said: "There has been a tendency in recent years to target high-profile personalities. Of course, the high-profile cases will generally reap in more reward for HMRC, however the associated court costs risk being significant.
“These cases also make a more public splash to show why businesses and contractors need to follow compliance procedures and ensure they are paying the correct taxes or expect to feel the repercussions down the line.”
