Eamonn Holmes, host of ITV’s This Morning, revealed last weekend he is embroiled in a tax battle with HMRC that experts claim could cost him up to £2m.
The legal wrangle relates to Holmes’ earnings as a freelancer, which HMRC claims have unpaid taxes dating back seven years.
Holmes is paid as a freelancer by ITV, with earnings taken by his own private company, meaning he pays corporation tax at 19%. In its fight against disguised employment, HMRC is demanding high profile stars like Holmes pay income tax at the 45% rate, like employees and sole traders earning above the £150,000 threshold.
Holmes is estimated to earn at least £700,000 a year from his media work, which includes a weekly show on Talkradio. As of April 2017, his Red White and Green Ltd company held just over £3m in cash.
Speaking to the Mail on Sunday, Holmes said he was the victim of a “test case” by HMRC. “If they win against me they will go after everyone else, everyone. Ant and Dec will be next.”
He added: “I’ve been freelance for 28 years and that’s been okay. Now they’ve said it’s not okay.”
The wrong target?
Elaborating on the case, Dave Chaplin, CEO of ContractorCalculator, said HMRC’s pursuit of TV presenters represented a “witch hunt and a misguided attempt to shore up the Treasury’s coffers by using outdated legislation”.
“The Intermediaries Legislation, commonly called IR35, was created in April 2000 by HMRC to crack down on the ideological invention by HMRC of ‘deemed employees’,” Chaplin said.
Find out more about what IR35 is and how it affects you as a business owner
“The fact is that high paid freelancers who earn six figures now pay more tax by operating via a limited company than an employee on the same salary.”
Chaplin added: “The tax efficiency by hiring someone self-employed is actually obtained by the firm that hires them, in this case ITV, who would have avoided having to pay Employers National Insurance of 13.8% on top of whatever monies were paid to Mr Holmes. To suggest that Holmes has avoided tax is pointing the finger in entirely the wrong direction.
What is IR35?
IR35 is designed to tackle tax avoidance by workers carrying out services via intermediary companies to get out of paying income tax and National Insurance contributions. If a court rules that the person would have been employed were it not for the intermediary company, they are caught by IR35.
IR35 claims another victim
Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), said the story “once again” highlighted the complexity of off-payroll IR35 legislation.
“Individuals choosing to be self-employed are in a very different position of security to someone who is a permanent employee with all the accompanying statutory rights and benefits,” she explained.
“We dispute that personal service companies (PSCs) are a mechanism to avoid tax, they are a perfectly legitimate way of someone being in business on their own account which some people prefer being a sole trader because it separates business and personal liabilities.
Read more: The difference between sole traders and limited companies
“It is essential that HMRC does not penalise everyone working through PSCs in a blanket fashion as they bring much-needed flexibility to both the freelancer and businesses that engage them on a short-term basis, just as the Lords Select Committee stated in its report in 2014. Employment status is complex and Mr Holmes’ situation is further proof that the Government needs to address this outdated legislation as a matter of urgency.”
__________________________________________________________________________________
Former BBC presenter to pay HMRC over £400,000 after losing IR35 case
__________________________________________________________________________________
“Playground bullies”
A spokesperson from chartered accountancy firm Michael Ogilvie said HMRC officials were “behaving like playground bullies.”
They added: “The higher the profile of the person they can get, the better – it sends a message far and wide.”
An HMRC spokesman told the Mail on Sunday: “It is clear that most TV presenters will fall into the category of being employees based on the nature of their work, and the policy that sets this out has been the same for years.”
Other presenters operating under their own limited companies include Phillip Schofield, Holly Willoughby and Ant and Dec.
Sign up to our newsletter to get the latest from Business Advice.
