Your initial responses may be 'Yes she is' and 'So what?' Well, last month Ms Kelly defeated HMRC at an IR35 tax tribunal after successfully appealing a tax bill of £1.2 million. Yes, we raised an eyebrow too. HMRC claimed that despite ITV engaging with Albatel Ltd, a limited company owned by Ms Kelly and her husband, she was really an employee, who owed £900,000 income tax and £300,000 in National Insurance contributions.
There are two Lorraines
The court found that ITV did not engage Lorraine Kelly herself but Lorraine Kelly, the brand, with her 'act' being to 'perform the role of a friendly, chatty and fun personality'. Ms Kelly could work for others and didn't benefit from holiday or sick pay. It was a contract for services not a contract of service.
In 2016/17, HMRC collected £819 million in additional taxes following payroll investigations. From April 2020, the rules for engaging individuals through personal service companies are changing. It will be your responsibility to determine whether the off-payroll working rules apply because your engagement is really one of employer and employee. In addition to shortfalls in tax and NI, if you are found to have incorrectly engaged someone on a self-employed basis, you may be liable to backdated pay for holiday, maternity, redundancy, sickness and pension. So, what should you do?
Time for a review
Look at your current workforce including those engaged through agencies and other intermediaries to identify those people who are supplying their services through Personal Service Companies.
Determine whether the off-payroll rules apply to any arrangements that will extend beyond April 2020.
Talk to your contractors about whether the off-payroll rules apply to their role.
Draft a clear contract of engagement that mirrors your practice and minimises the risk of future liabilities.
Ensure that you put a process in place to determine the status of current and future engagements.