The First-tier Tax Tribunal was asked to consider the application of the intermediaries' legislation (IR35) called off-payroll working to payments made by Manchester United Football Club (MUFC) to Bryan Robson Ltd.
Background:
This is an appeal under Regulation 80(5) of The Income Tax (Pay As You Earn) Regulations 2003 (the PAYE Regulations) and Section 31 of the Taxes Management Act 1970 (TMA 1970) in relation to determinations to income tax made under Regulation 80 of the PAYE Regulations for services provided to MUFC as a Global Ambassador from 2015/16 to 2020/21 via Bryan Robson Ltd.
The company, incorporated in 1981, is the personal services company of football legend Bryan Robson. The company entered into a series of "Ambassador Agreements" with MUFC which were performed personally by Mr. Robson. Those agreements included a licence for MUFC to exploit Mr. Robson's "image rights" and required Mr. Robson to make a certain number of personal appearances per year at MUFC's request, in consideration for a fixed sum.
For HMRC, Mr. Robson was deemed an employee rather than an independent contractor. Under the IR35, a worker who provides service to a client through their own company would be considered an employee if the service is provided directly to the client. In that case, the earnings would be subject to PAYE and NICs.
Decision:
Mr. Robson was ruled to be a "deemed employee" for the 16 months from 03 December 2019 to 05 April 2021. The fact the agreement included both licensed image rights and the obligation to personally perform services did not take the arrangements outside IR35 altogether. In determining the part of payment attributable to the licensed image rights, the Tribunal attached significance to their considerable value to the club, and the club's genuine interest in exploiting those rights. Another factor that influenced the Tribunal's decision was the nature of the obligation within the agreement, which required Mr. Robson to make at least 35 personal appearances annually.
The Tribunal also noted that the facts were not the typical case relating to the IR35 legislation which "may be a tribute to the ingenuity of the appellant and its advisers." The image rights were not subject to the IR35 legislation and were left to be decided separately.
The Tribunal has directed the parties to agree and set aside part of his earnings, which constitute fees for image rights, and, for the rest, decide on the quantum of the extra tax due under the IR35 rules.
Implications:
This lengthy, fact sensitive, case highlights the intricate factors that determine employment status under IR35. It is also very important for anyone providing service through a personal service company. This case might be relevant for freelancers, content creators, and contractors working for a specific client in image-related agreements. It also highlights the need for a high level of autonomy to be considered truly self-employed.
It also underscores the need for those contracts to be watertight, as HMRC's investigation often starts with the contract itself. It is also the first IR35 case considering whether consideration paid to an intermediary was attributable to the granting of intellectual property rights beyond IR35.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.