Football Pundit Neil McCann loses IR35 appeal resulting in £210,000 tax bill

Former professional footballer turned Sky Sports pundit Neil McCann’s lost his IR35 case against HMRC for a second time last week. McCann, operating through his limited company, McCann Media Ltd, has been saddled with a substantial tax bill of £210,000.

This case began in 2018 when HMRC asserted that Mr McCann should have been classified as an employee rather than a freelancer during his contracts with Sky Sports between 2013 and 2018. McCann contested this claim, and after his initial appeal at the First-tier Tribunal (FTT) was dismissed in 2022, it being found that he was not in business on his own account, McCann pursued the matter further, leading to the Upper Tribunal (UT) hearing in October 2023.

The 3 grounds of McCann’s appeal and the subsequent findings were as follows:

Ground 1: The FTT erred in law with respect to the issue of mutuality of obligation.

The UT dismissed McCann Media Ltd’s arguments suggesting that McCann’s ability to refuse work and his unrelated contract with Dundee FC invalidated mutuality of obligation. HMRC contended that the FTT rightly concluded that an essential characteristic of an employment contract is the employer’s obligation to pay the employee regardless of whether the services are rendered, citing the Court of Appeal’s decision in the Atholl House (Kaye Adams) case.

The UT acknowledged factual findings by the FTT and clauses in the contracts inconsistent with the notion that Sky had no obligation to offer work or McCann to perform it.

Ground 2: The Tribunal erred in law by failing to take into account and/or properly apply the third limb of the Ready Mixed Concrete case, namely other factors of the contractual relationship were inconsistent with employment.

Regarding the second ground, concerning the ‘other factors’ aspect of Ready Mixed Concrete, the UT concluded that the FTT had appropriately assessed relevant contractual clauses and circumstances. While certain clauses (such as indemnities) arguably conflicted with employment, the UT found no legal error in the FTT’s evaluation.

Ground 3: The Tribunal erred in law in applying the three-stage test set out in the Kickabout Productions case.

The UT dismissed McCann Media Ltd’s argument that the FTT had blurred the distinction between actual and hypothetical contracts, stating that “Whilst the use of the term “blurring” may not be an apt description of the Upper Tribunal’s observations in Atholl UT the FTT clearly understood the import of those observations.” Therefore, the UT concluded there was no legal error.

Overturning FTT decisions? Slim chance of success

Neil McCann was brave to take on HMRC again, considering the formidable findings of the FTT. With FTT IR35 case decisions statistically prone to being upheld by a UT, losing on all 3 grounds of appeal was no doubt a blow and there are lessons to be learned from the case.

MOO still playing a key role

MOO has once again played a key role, notably around the fixed monthly fee arrangement irrespective of work completed, which was in contradiction with McCann’s assertion that the work performed for Sky was “ad-hoc” in nature.  This emphasises the critical importance of written contracts reflecting the reality.  Despite the ongoing ambiguity surrounding MOO (soon to be clarified in the PGMOL outcome), it is clear that HMRC views the test as uncomplicated, courts are agreeing and engagers/contractors are expected to have a solid grasp of employment status fundamentals.

Working practices are King

This case demonstrates again that IR35 is about the “entire” picture.  What sets McCann apart from the likes of Kaye Adams and Adrian Chiles (pending his UT judgment also) was the inability to demonstrate a genuine in-business position, a critical factor in their cases. While focus remains on media personalities bearing little resemblance to the typical IT contractor, the key lesson remains universal: there is no single determinative factor, working practices must substantiate an overall outside IR35 position, and written contracts must fully support that position.