JUNE 2019

a tax supplement from pkffpm accountants

UK Employed or Self-Employed? TV Host Shows The Way!

I have been following with interest the She decided her own hours, substantially below the sufficient recent UK case of and how undertook her own research outside degree required to demonstrate a of contractually committed hours, contract of service. she successfully argued that she was not worked for other broadcasters an employee of ITV but a self-employed and had her own clothing line. Looking at the overall picture, the relationship between Ms Kelly and business person. Can you explain the key She did not receive sick pay or a pension. She was entitled to send ITV was a contract for services and facts in this case and what self-employed a substitute if she was unavailable. not that of employer and employee. contractors can take from it? ITV was not employing a “servant” it She maintained that she was a was purchasing a product, namely self-employed entertainer and the brand and individual personality theatrical artist who was playing a of Lorraine Kelly. The employment part when she presented the shows intermediary rules, in question. In contrast previous cases involving known as IR35, impose the BBC have resulted in the employment taxes on a Personal HMRC issued a tax determination tribunal upholding HMRC’s decision Service Company (PSC) where notice in respect of Class 1 NICs to apply IR35. It is reported that the arrangements between the arising from the application of more IR35 appeal cases involving worker and the end client are the IR35 rules for £1,212,528 ITV presenters are likely to reach such that, if engaged directly, contending: the tribunal in the near future. Watch this space! the worker would have been an • Had there been a direct contract employee. In this case the PSC between Lorraine Kelly and ITV must treat the amounts received Breakfast Ltd during the period of as employment income of the engagement it would have been a individual and operate PAYE and Malachy contract of service. NIC. McLernon • There was mutuality of obligation The recent case of television Tax Director, PKF-FPM with ITV. presenter, Lorraine Kelly, who [email protected] successfully defeated HMRC at a • The agency fees she had paid tax tribunal for her work with ITV to her agent were not deductible Breakfast. The case also involved • Her contract was for a minimum expenses. the question as to whether agent of 2.5 years for which she was paid The tribunal in allowing the appeals fees were a deductible employment a fixed sum per year on a monthly expense. analysed whether there was a basis. It allowed her ten weeks non- contract of service, or for services: • Between 2012 and 2014 Lorraine working time per year. Kelly was contracted, via her own • There was mutuality of obligation, • The contract also specified her but it amounted only to the company which was set up in onscreen days and hours, allowed 1992, to present two shows for “irreducible minimum” and was not her creative input, and she was determinative of the issue. ITV Breakfast Ltd, Lorraine and involved in every aspect of the For more advice contact Daybreak. Malachy McLernon or any show, including changing the script • Control of her work lay with her; of our Tax Team TODAY... and running order. the level of control by ITV fell

Whilst every care has been taken to ensure the accuracy and contents of this publication, the information is intended for general guidance only. 2

Tax Implications for Commercial Rentals of NI Company with Property Owned by RoI Subsidiaries

I have a Northern Ireland incorporated This activity is potentially classified the property in the Republic of as a trading activity and therefore Ireland will be sold, the proceeds company which has recently acquired subject to the lower Republic of realised and distributed to the an Irish company which owns a rental Ireland corporation tax rate of beneficiaries of your estate. The property. I am considering renting the 12.5%. If it is a trading activity then sale of the property, will be subject the surcharge rules do not apply to Irish capital gains tax at a rate of property out on a commercial basis to the trade. It will be therefore 33% using current rates. This tax and providing ancillary services such very important to ensure that your is unavoidable as Ireland, like the as meals, transport and cleaning. I was company is carrying on a trading UK, charges capital gains tax on activity rather than a company properties that are located within born in Northern Ireland and currently earning investment income as their country. You will then be left reside in the Republic of Ireland. What this will effectively reduce the tax with an Irish company which has are the general tax implications of my rate by 50%. Note the hospitality a single asset in the form of cash activity will be subject to VAT. and this cash could be dividended situation? up to the UK parent company, Your personal circumstances the Irish company liquidated and also provide further opportunity the UK parent company liquidated for efficient tax planning. As you with proceeds being paid out If your UK company are resident in the Republic of owns an Irish subsidi- as a capital distribution upon Ireland but domiciled in the United liquidation. ary company which Kingdom the Irish subsidiary carries on an activity of rent- company could pay a dividend This capital distribution will be ing a property, the Irish com- up to the UK holding company subject to capital gains tax at pany will be subject to taxation equivalent to the net profit. If your either 20% or potentially 10% within the Republic of Ireland at company is deemed to be an subject to the company qualifying 25% on the rental profit which investment company this would as the holding company of a basically equates to the rental eradicate the Irish surcharge on trading subsidiary. The disposal income less the expenses of the surplus rental income. If your of the property is a very complex maintaining the property, inter- company is a trading company matter for taxation purposes and est charges etc. By then the dividend will pass the prior to the disposal of property In Ireland, normally if this profit is net profit up to the UK holding you should seek tax advice as not distributed to shareholders then Paddy Harty company. As a UK domiciled, Irish given the cross jurisdictional tax Senior Tax Director resident taxpayer you will be able implications there is potentially a it is subject to a further surcharge [email protected] tax. This tax can be avoided in to dividend this surplus income out lot of tax at stake. your circumstances by declaring of the UK holding company to you a dividend within 18 months of the personally and provided you do financial year end up to the UK that it is not simply renting out not remit the monies back to the holding company. However, in the the property, rather, it is providing Republic of Ireland, the personal circumstances that you describe, dividend is exempt from taxation. For more advice contact services ancillary to the letting of Paddy Harty or any of our the Irish company appears to be the property. Turning to the longer term, Tax Team TODAY... carrying on a hospitality trade in eventually one must assume that

Whilst every care has been taken to ensure the accuracy and contents of this publication, the information is intended for general guidance only.