Actor Robert Glenister provided his services through Big Bad Wolff Ltd for several years.
Unlike most IR35 cases, there was no real argument over whether Glenister would have been an employee if he had contracted directly with the producers who hired him.
Both sides accepted that he would have been self-employed under the normal employment-status tests.
The dispute arose because actors were subject to a separate National Insurance rule at the time. That rule could treat an entertainer as an employed earner for NIC purposes even though the underlying contract was one of self-employment.
Robert Glenister worked through Big Bad Wolff Ltd
Glenister was a successful actor and supplied his services to producers and other clients through Big Bad Wolff Ltd.
The Upper Tribunal appeal concerned services provided through the company between 6 April 2004 and 5 April 2011.
HMRC decided that the company was liable for primary and secondary Class 1 National Insurance contributions under the Social Security Contributions (Intermediaries) Regulations 2000.
Big Bad Wolff challenged that decision.
The unusual problem with actors and National Insurance
At the time, the Social Security (Categorisation of Earners) Regulations 1978 contained special rules for entertainers.
An actor could be working under a contract for services and still be treated as an employed earner for NIC purposes if the payments met the regulations’ definition of “salary”.
That produced an unusual result. Glenister could be self-employed for income tax purposes but treated as employed for National Insurance.
The special NIC treatment for entertainers ended on 6 April 2014.
The employment-status question was already agreed
This was not a case where the tribunal had to decide whether Glenister was controlled by a client, had a right of substitution or was integrated into a production company.
It was common ground that, if he had contracted directly with his clients, the contracts would have been contracts for services rather than contracts of employment.
It was also accepted that the old entertainers rules could nevertheless have treated him as an employed earner for NIC purposes.
That left one question at the centre of the case: did the intermediaries legislation apply only where the hypothetical direct contract created actual employment, or could it also apply where another piece of legislation deemed the worker to be employed?
The First-tier Tribunal sided with HMRC
The issue first reached the First-tier Tribunal in 2017.
Judge Guy Brannan decided a preliminary point in HMRC’s favour. He found that the intermediaries regulations could apply where Glenister would have been treated as an employed earner under the separate categorisation rules.
Big Bad Wolff appealed that decision to the Upper Tribunal.
Big Bad Wolff said IR35 required real employment
The company’s argument was straightforward.
It said the intermediaries rules were intended to apply where the worker would have been an employee if the personal service company had been removed from the arrangement.
Glenister did not satisfy that test. Everyone accepted that his direct contracts with producers would have been self-employed contracts.
The company argued that another set of regulations treating actors as employed earners for NIC purposes should not turn that self-employed relationship into an IR35 liability.
The Upper Tribunal rejected that reading
Mr Justice Henry Carr and Judge Jonathan Richards did not accept that the legislation was limited to actual contracts of employment.
The wording referred to a worker who would be regarded as employed in employed earner’s employment if the intermediary were removed.
That was wide enough to include somebody treated as employed under another statutory provision.
The judges said Parliament had used language capable of covering both ordinary employees and workers who were deemed to be employed earners for National Insurance purposes.
Tax and NIC did not have to produce the same answer
Big Bad Wolff also argued that IR35 should operate as a single code, with the income tax and National Insurance rules producing the same result.
The Upper Tribunal disagreed.
The tax and NIC systems had not been identical before IR35 was introduced, and no part of the intermediaries legislation had to operate in exactly the same way.
That meant Glenister could remain self-employed for income tax purposes while the company still faced an NIC liability under the intermediaries rules.
The entertainer rules were deliberately wide
The tribunal also looked at the purpose of the old categorisation rules.
They were not restricted to struggling or lower-paid actors. If an entertainer received remuneration falling within the statutory definition, the rules could apply regardless of how successful the performer was.
The fact that Glenister was an established actor therefore made no difference.
One issue was left open
The appeal proceeded on the assumption that the relevant contracts involved payments falling within the statutory definition of salary.
The First-tier Tribunal had not finally decided that point.
The Upper Tribunal therefore dealt only with the legal issue before it: whether the intermediaries regulations could apply where the worker was deemed, rather than actually, employed.
The appeal was dismissed
The Upper Tribunal agreed with HMRC and upheld the First-tier Tribunal’s interpretation.
The NIC intermediaries rules could apply even though Glenister’s hypothetical direct contracts would not have made him an employee under ordinary employment law.
Big Bad Wolff’s appeal was dismissed.
Why Big Bad Wolff is different from most IR35 cases
There is little value in comparing Big Bad Wolff with the usual contractor cases on control, substitution or mutuality of obligation.
The employment-status question had already been answered in Glenister’s favour.
The case instead dealt with the interaction between two sets of National Insurance regulations and confirmed that the NIC version of the intermediaries rules could apply to someone treated as employed only because another statute said so.
The decision is therefore an unusual part of the IR35 case law rather than a standard employment-status appeal.
Judgments
Big Bad Wolff Ltd v HMRC [2019] UKUT 121 (TCC).
The Upper Tribunal decision was released on 9 April 2019 by Mr Justice Henry Carr and Judge Jonathan Richards.
Read the Upper Tribunal decision on GOV.UK.
The earlier preliminary decision was Big Bad Wolff Ltd v HMRC [2017] UKFTT 729 (TC).