Sky Sports pundit loses £210,000 IR35 appeal

Former footballer is one of many media personalities targeted by HMRC and becomes latest victim of IR35

Neil McCann – a former footballer-turned-Sky Sports pundit – has become the latest high-profile contractor to lose an IR35 appeal, leaving him with a tax bill of around £210,000. 

McCann had previously contested his case at a First Tier Tribunal (FTT), which ruled in HMRC’s favour in 2022. He appealed again, with the case referred to an Upper Tier Tribunal (UTT), where the latest decision was reached.

He’s one of many presenters targeted by HMRC for IR35 non-compliance, with freelancers engaged by Sky under particular scrutiny. 

But what decided the case? And what might this mean for contractors and the businesses engaging them?

Let’s take a look…

A brief case history 

McCann had provided his services to Sky as a commentator and pundit from the 2013/14 to 2017/18 tax years. 

According to the case notes, HMRC had “issued various determinations and notices” to McCann over unpaid PAYE and NICs liabilities for incorrectly operating outside IR35 across the contracts and tax years in question.

At a previous appeal in 2022, the judge ruled that he couldn’t “be considered to be in business on his own account”. A few factors underpinned this decision; his “entitlement to an annual fee” from Sky carried “particular weight”.

Excessive contractual control was also decisive. In short, this meant the hypothetical contract between McCann and Sky was “consistent with a contract of employment”. 

But McCann appealed this and the case made its way to the Upper Tier Tribunal in October 2023.

Key factors at the latest appeal

The former footballer’s appeal was made on three grounds. 

First, he believed the FTT had “erred in law” in its considerations on Mutuality of Obligation (MoO), and its interpretation of existing case law: Ready Mixed Concrete and Kickabout Productions Ltd. 

Both cases are significant for IR35, with each using a different test to understand whether a contractual relationship might constitute employment.

MoO

Let’s start with Mutuality of Obligation, as this is the most straightforward to tackle. 

McCann’s representative argued the FTT had failed to take into account his engagements with other clients. This included his appointment as interim manager of Dundee FC alongside his work for Sky.

The UTT rejected this, however, reasoning that McCann provided his services to other clients to a “very limited extent” for the duration of the Sky contracts.

Ready Mixed Concrete

Next was the FTT’s interpretation of Ready Mixed Concrete (RMC). McCann’s defence contested that the FTT didn’t “properly apply the third limb of RMC”. 

The “third limb” concerns whether the contractual terms indicate employment. McCann’s contracts with Sky contained “core and salient provisions” which were “inconsistent with a contract of employment” – something the FTT failed to account for.

Again, this was rejected by the UTT. 

Kickabout

The final ground for appeal was whether the FTT had correctly applied another case law test – that was set out in Kickabout, a recent IR35 case involving Talksport presenter Paul Hawksbee. This highlighted the importance of ensuring that the working practices align with the contract itself. 

In the McCann case, the pundit’s representative argued that the FTT “blurred” the actual and hypothetical contracts. As a result, the decision reached was built on shaky foundations and was “incorrect as a matter of law”.

However, this was dismissed, with the UTT stating that the FTT “clearly understood” those “observations” and had not incorrectly applied this test. 

What does this result mean?

First and foremost, this case is a reminder of just how costly non-compliance can be.

Speaking to the FTAdviser, our CEO, Seb Maley, said McCann was just “the latest in a long or IR35 cases that highlight the devastating financial impact” of non-compliance. 

For contractors, the key takeaway is that your ability to demonstrate compliance is crucial – particularly given that when engaged by small businesses you remain liable for IR35. 

But there are also lessons for businesses. This case is a good example of the importance of ensuring that what is contractually agreed reflects how the services are provided day-in-day-out. 

Given the McCann case hinged on technical aspects of IR35 case law, which can be difficult to navigate at the best of times, expert advice and support are crucial in ensuring compliance.