Phil Thompson IR35 loss: ‘FTT didn’t put a foot wrong finding ex-footballer caught’

Kingsbridge’s lack of shock at Sky pundit losing to HMRC is echoed by top status and contractual experts.

A Sky TV pundit’s IR35 appeal was doomed to fail, mainly due to seven reasons, according to Kingsbridge and other status experts.

First, in lieu of bringing in new facts, the pundit, Phil Thompson, had to make a firm case that his inside IR35 verdict was wrongly ascribed.

Second, rather than finding such “compelling” faults with the FTT’s ruling, Thompson relied at the UT on contractual “interpretations”.

‘Semantics’  

Third, Thompson’s appeal grounds to the UT for his 2014-18 Sky contracts for football punditry, hinged on such contractual “semantics”.

Matt Tyler of Kingsbridge cited this trio to explain Thompson’s IR35 loss, which cues up HMRC to collect £294,306 in NIC and PAYE.

‘Phil Thompson’s IR35 loss not a shock, rather a foregone conclusion’ 

“I’m not sure it’s a shock Thompson’s Upper Tribunal appeal failed if I’m honest,” began Tyler, Kingsbridge’s IR35 Consultancy Manager.

“The UT will only really consider errors of law. So you need to present a fairly compelling argument that the FTT erred.

“But the four grounds of appeal by Thompson…seemed to hinge on wording interpretations in his contractual terms.

“And from an outsider’s perspective, [these] look very much like semantics, unfortunately.

“This means, in my opinion, that Thompson’s IR35 appeal [defeat] was somewhat of a foregone conclusion.”

‘Ad hoc as and when required’ 

The fifth reason Thompson lost owes to one of his appeal grounds citing a clause that, paradoxically, actually screamed ‘inside IR35’.

ReLegal Consulting says: “This case is about a football pundit. [But] it is very relevant to employment status and contractors generally.

“[And that’s because] the case looks at ‘ad hoc as and when required.’

“[This clause represents a] framework of control [and control] is now the leading factor in classifying status.”

‘PD and MJ Ltd services to be provided whenever Sky required them’

According to his contract, Thompson’s company (PD and MJ Ltd) provided services to Sky “on an ad hoc as and when required basis”.  

In 2023, the First-tier Tribunal ruled that such a clause “did not give” Thompson a right to refuse any request by Sky to provide punditry.

So, his working was not “by mutual agreement” and his services “were to be provided whenever Sky required them,” found the FTT.

‘Language of servitude’

Egos Ltd is a legal firm which has been specialising in contractual, commercial and employment law since 1994.

The firm says the “on an ad hoc as and when required basis” clause was damming for Thompson, as it uses “the language of servitude.”

“The contract also stated both the company and the individual would comply with ‘all directions and requests’ [by Sky].”

‘Do what you’re told, as and when we tell you to do it’

 “To my mind,” Egos’ Roger Sinclair told Kingsbridge, “contractual wording like this, in essence, says ‘do what you are told, as and when we tell you to do it’”.

He warned: “Any contractor who accepts wording such as this – in a contract – has probably already offered HMRC a magic bullet.”

‘IR35 magic bullet’

Sinclair says it’s ironic because an “IR35 magic bullet” was once the focus for contractors to use against HMRC, as “simplistic” as it was.

Last night, reasons six and seven behind Thompson not convincing the UT he was outside IR35 came from status advisory Bauer & Cottrell.

‘UT found FTT didn’t put a foot wrong finding ex-footballer inside IR35’

“In finding that the FTT didn’t put a foot wrong in ruling this ex-footballer inside IR35, the UT made two key points,” started B&C.

“It rejected the argument that merely lacking employee benefits would lean towards self-employment.

“And in addition, it found that additional income sources won’t change the position if the majority of earnings come from a single client.”

‘HMRC increasingly focusing on control and financial dependency’

B&C added that contractors who might not relate to being on TV might relate to 80% of earnings from one client, as Thompson had.

The status advisory’s director Charlie Hemsworth explained her assessment to Kingsbridge:

“Thompson’s unsuccessful appeal adds to a growing trend of HMRC and the courts focusing on control and financial dependency.

“Working predominantly for one client, under a contract granting [it] considerable control and embedding the PSC into the client-organisation, is probably going to place an engagement squarely inside IR35.”

‘Similar patterns found in Robson and Barnes IR35 cases’

“Similar patterns have emerged in other recent IR35 cases, including those involving Bryan Robson and [also of Sky TV], Stuart Barnes.”

At Kingsbridge, Mr Tyler said he agrees that the Thompson case has links to recent IR35 case law, especially cases that HMRC won.

‘Engagement’s reality’

“There seems to be a strong shift towards the contract being considered the prevailing factor when determining IR35 status currently – which is, on the face of it, the means by which Thompson attempted to appeal on.

“I can appreciate the sentiment behind this focus, but I don’t necessarily wholly agree with it.

“In my experience, the only way to really prove the intention of the contractual terms is to look at the reality of an engagement, which means… [to my mind] the weighting will always remain towards the reality trumping the written terms.

“But that does not in any way or form mitigate the importance of a properly written contract that reflects how the contractor is engaging with their client.”

‘Poor contract full of inaccuracies’

“Just be aware,” continued the Kingsbridge IR35 Consultancy Manager, “HMRC can, and will, pick apart the contract to help prove their point. So the less ammunition you provide with a poor contract full of inaccuracies, the better off you will be.”  

The long and short of ‘Thompson’ to ReLegal Consulting is that where IR35 of 2000 is a consideration, end-users must get reviewing.  

‘Post-PGMOL, end-client organisations should now be reviewing’

ReLegal’s boss Rebecca Seeley Harris says: “It’s not an easy read [for non-HMRC parties] but [the judgment shows] the UT agreed unanimously with the First-tier Tribunal on all points and dismissed Thompson’s appeal.

“Recent case law including the Thompson case definitely means that engagers should be reviewing their strategy and training on employment status, post-PGMOL.”

‘Same IR35 status tests apply across the board’

Yet it’s not just engagers who might need to rethink, as B&C’s Hemsworth hinted.

“Non-celebrity contractors may not share the public profile seen in the case of Thompson V Sky TV. But the same status tests apply across the board.

“Many contractors tend to work with a single client at a time,” she says. 

“So it’s essential to ensure that both contract terms and working practices can withstand scrutiny around control, mutuality, and independence.”

‘No error of law by FTT in Thompson IR35 judgment’

Where such withstanding is flaky, IR35 insurance appears to be a more prudent response than going to court – twice and losing both times.

Egos’ Mr Sinclair says: “The FTT’s decision in December 2023 was that PD & MJ Ltd’s contract fell within IR35, and the UTT, on appeal, has now said it sees no error of law in that conclusion. 

“I can’t say I disagree with them. And indeed I – in common I am told with others – find myself wondering why this IR35 appeal was thought worthwhile bringing.”

How Kingsbridge can help

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