Richard Curtis reviews the recent case of Robson v Revenue and Customs on employment status.
Football supporters of a certain age will be familiar with the name of Bryan Robson, particularly the important part he played between 1981 and 1994 in the success of Manchester United Football Club (MUFC).
Some years after he finished playing, Mr Robson became an ‘ambassador’ for MUFC. At first, the agreements to carry out this work – personal appearances – and for the use of his image rights were between the club and Mr Robson personally; but from December 2019, the agreement was between MUFC and his personal company, Bryan Robson Limited (BRL).
HM Revenue and Customs (HMRC) took the view that the payments from MUFC to RBL were from a disguised employment and within the ‘off-payroll working’ rules. Often known as ‘IR35’, these rules seek to ensure that a worker or contractor (here, Mr Robson) providing services to a client (MUFC) through an intermediary (RBL) will pay a similar amount of income tax and National Insurance contributions (NICs) as an employee.
The rules and their application
The IR35 rules apply if:
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an individual (the worker) personally performs, or is under an obligation personally to perform, services for another person (the client):
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the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (the intermediary); and
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the circumstances are such that if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.
Previous tax and employment cases have established a three-stage test to determine a worker’s employment status. This considers whether:
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there is a mutuality of obligation between the parties;
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the employer has control over the worker; and
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the other terms are consistent with an employment relationship.
The tribunal’s decision
The First-tier Tribunal (FTT) found that mutuality of obligation and control were present. Mr Robson had agreed to make a specific number of personal appearances each year in return for a fixed fee and the club could control the ‘what, when, where and how’ of the services to be provided by him, even though he could refuse some requests for personal appearances.
The FTT also found compelling evidence that the other terms would have created a relationship of employment. Factors supporting this conclusion were the length of the relationship between Mr Robson and MUFC, that this formed most of his income, his importance in deepening the relationship between the club and its sponsors and fans, and that he had stepped back from pursuing many other engagements. Previous cases concerning the existence or otherwise of an employment relationship had supported the idea that one must take account of all such factors to ‘paint a picture’ of the relationship. Although Mr Robson had a degree of autonomy in choosing whether to attend particular events, there was no financial risk for him. Further, he wore club clothing, granted exclusive licensing of image rights, and had to act under MUFC’s directions. This all painted a picture of an employment relationship.
Conclusion
The FTT concluded that the hypothetical contract between Mr Robson and MUFC was one of employment.
However, the IR35 rules applied only to payment for the personal services rendered rather than for image rights, so only the amount related to the former would be subject to increased income tax and Class 1 NICs liabilities. The FTT left it to the parties to determine the apportionment of these elements between personal appearances and image rights, with the option to return to the tribunal if they failed to agree.
Practical tip
Over the years, the tax tribunal has made many decisions on the IR35 legislation. This latest decision (at about 80 pages, see https://tinyurl.com/467y3pzu) will make interesting reading for advisers and clients seeking clarification of whether their own circumstances might also be caught by the IR35 legislation.
