Football is a game of opinions, especially for spectators who may be watching the same game but have two starkly opposing views of how the game went!

IR35 may be similar due to the subjective nature of some of the employment status tests. There are occasions, however, where you have to accept the kismet, such as the First Tier Tribunal’s IR35 ruling against Sky football pundit and co-commentator Neil McCann, writes Andy Vessey, tax manager at Kingsbridge.

Not one but two IR35 defeats for Sky Sports presenters

McCann is not to be confused with Dave Clark, also probed by HMRC under IR35 for presenting sports to Sky, but two back-to-back presenters – both operating for the same broadcasting company – each losing, looks remarkable.

McCann is a former Scottish Premiership footballer and manager. Like many ex-players who eventually hung up their boots, he was keen to join the ranks of Sky and did so, via McCann Media Limited (MML) in 2009.

The MML-Sky contracts that HMRC probed

However, it was two contracts covering the periods 1 July 2012 to 30 June 2014 and 1 July 2014 to 30 June 2017 which fell under the microscope of HMRC, for which MML received an annual fee starting at £110,000 and which grew every year until its peak at £130,000.

A new contract was due to start on 1 July 2017, but McCann had decided to accept an appointment as permanent manager of Dundee FC, so the new contract was scrapped.

In 2018 and 2019 HMRC increased tax and NIC assessments for the period 6th April 2013 to 5th April 2018 totaling £210,000 which has been the subject of this appeal.

Three steps (not in heaven!)

In constructing the “hypothetical contract”, as required by the legislation, the court applied a three-step process:

  1. Determine contractual arrangements;
  2. Synthesize a single hypothetical contract; and
  3. Apply the traditional employment status criteria (as set out in the Ready-Mixed Concrete case).

hypothetical contract

The FTT broadly agreed with HMRC’s version of the hypothetical contract, but with some modifications. The final terms, which incorporated not only the Sky contracts but also the NDAs, would include:

  1. McCann obliged to provide his services as a presenter, commentator, expert, interviewer, guest or other participation. The dates on which McCann provided his services would be agreed between the two parties. In return, Sky would be required to pay an annual fee paid in equal monthly installments.
  2. If McCann fails to provide services for more than four weeks, Sky could terminate the agreement.
  3. Sky would have the right to determine where and when the work was done and the role McCann would fulfill on such occasions.
  4. Final editorial control over any content containing McCann’s contributions rested with Sky – and they would retain intellectual property rights.
  5. Ofcom guidelines should be adhered to by McCann.
  6. McCann was prohibited from working for other television/radio, media, print or betting organizations without Sky’s prior written consent, and Sky controlled McCann’s use of social media.

Apply status tests

1. Personal Service and Mutual Obligation (MoO)

Sky paid MML what essentially amounted to an annual salary, paid monthly and regardless of the amount of work McCann performed in any given month.

There was a requirement for McCann’s personal service, with no real right of substitution, or ability to delegate work to others.

Although the dates and games to be covered were agreed between McCann and Sky, this did not negate the existence of the required level of mutuality of obligation (MoO).

2. Control

The FTT considered that Sky had a sufficient degree of control over McCann to steer towards an employment contract because:

  • Sky decided which pundits to use for particular games (although McCann had the right to refuse matches).
  • Sky determined the roles to be played by those involved in the presentation team and McCann had to work within the agreed program format. The structure and timing of the broadcast was determined by Sky.
  • Although McCann provided his own expertise and owned the content, this was considered neutral in the context of professional skill.
  • McCann was heavily restricted in performing work outside of Sky.

3. Profit Opportunity

McCann could not increase the fees paid by Sky by taking on more work for Sky and therefore could not profit from his own sound management. The FTT gave some weight to this factor, considering it consistent with an employment contract.

The main status tests fell on the employment side of the field, and unfortunately for McCann, there was no other factor that could save the day.

McCann could not be considered to be “in business on his own account”, in part because of the fee structure and that it did not vary depending on the number of his appearances. Moreover, he was prohibited from exploiting other sources of income.

So what are the lessons for entrepreneurs from McCann Media V HMRC?

The world of television and entertainment does not lend itself easily to the working methods and models of other industrial sectors, due to its various nuances. However, in this case, I believe many IT contractors would recognize “disguised employment” in the provided overview of McCann’s working practices.

Although those who are paid on a fee basis, regardless of the work performed, may have cause for concern as a result of this judgementit should be remembered that status assessment requires a holistic approach, and so there may be significant factors that still place them in the “self-employed” camp, unlike Neil McCann.

Some contractors work in industries or sectors that have non-negotiable external guidelines or standards that must be adhered to. In the McCann case, HMRC sought to argue that being subject to Ofcom’s restrictions amounted to scrutiny. But the FTT admitted it was neutrality in the context of professionals contributing their expertise during live broadcasts. Potentially reassuring, therefore, the same approach should apply to highly skilled contractors working in an environment where industry standards prevail.

Final Thoughts

We know there are other IR35 cases from the media industry waiting in the wings. My fear is that HMRC’s victory parade will continue if the presenters, who have worked in the same way as McCann and cannot move key tests with, say, running a real business in the same way that Kaye Adams and Adrian Chiles did, are the matter. Familiar with reading and presenting stories on air, these presenters risk making headlines – for all the wrong reasons if, like Neil McCann, they cannot demonstrate on multiple fronts that they are a company of sincerity.