Lorraine Kelly Vs the IR35 Ruling
Lorraine Kelly, presenter of the television show ‘Lorraine’ on weekday mornings, was hit with the bill of nearly £900,000 in income tax and over £300,000 in national insurance in 2016.
HMRC had brought a case against the presenter under IR35 legislation after a crackdown on personal service companies, which she had used. Lorraine signed a contract to present ‘Lorraine’ in 2012, through the limited company - Albatel Ltd, which she runs with her husband.
HMRC argued that Kelly had claimed her agents’ fees as tax deductible and as an employee of ITV she was not entitled to do so. The deduction is only permitted for “theatrical performers” (classed as actors, musicians, singers, dancers or theatrical artists).
However, Lorraine Kelly claimed she was not an employee of ITV and was in fact an “entertainer” and her smiley, chatty persona was part of her brand. She stated to the tribunal that she played a version of herself on the show and drew comparisons to an actor appearing in a West End show for 12 months.
Lorraine Kelly argued that she was a freelancer, as she decides on the content of her show, does not receive sick pay or a pension from ITV and has no guarantee that her contract will be renewed.
The Ruling
Judge Jennifer Dean believed that Lorraine could be classed as a "theatrical artist", which would mean any payments to an agent would be allowed as a tax-deductible expense.
The judge also stated: "We did not accept that Ms Kelly simply appeared as herself - we were satisfied that Ms Kelly presents a persona of herself, she presents herself as a brand and that is the brand ITV sought when engaging her.
"All parts of the show are a performance, the act being to perform the role of a friendly, chatty and fun personality.
"Quite simply put, the programmes are entertaining, Ms Kelly is entertaining, and the 'DNA' referred to is the personality, performance, the 'Lorraine Kelly' brand that is brought to the programmes."
She added: "We should make clear we do not doubt that Ms Kelly is an entertaining lady but the point is that for the time Ms Kelly is contracted to perform live on air she is public 'Lorraine Kelly'.
"She may not like the guest she interviews, she may not like the food she eats, she may not like the film she viewed but that is where the performance lies."
What does this mean?
Having lost the £1.2m tax case HMRC has stated it was “disappointed”. However, it does show the importance of looking into professional IR35 advice and protection. It is advisable to ensure that IR35 reviews are conducted for any contract that a contractor engages in.
(Source: Gorilla Accounting)