The Commissioners for HMRC v S & L Barnes Limited

Clause 2.7 of the First Contract stated as follows:

The Key Terms included the following (FTT[31(1)]:

In the Second Contract, the definition of “services” included the following:

While the “services” to be so provided are defined slightly differently in the First and Second Contract, for both contracts, clause 1.1 of the “Key Terms” provides as follows:

The term “Associated Company” is definedas, broadly, a holding company or subsidiary of BSkyB or a company controlled by BSkyB (Footnote: ³).

HMRC’s appeal under Ground 1 relates to the following finding by the FTT as to the terms of the hypothetical contract, at FTT[111(5), (6) and (7)]:

HMRC recognised that their challenge under Ground 1 is a challenge to a finding of fact on the basis of the principles in Edwards v Bairstow [1956] AC 14. In HMRC v Anna Cook [2021] UKUT 0015 (TCC), the Upper Tribunal stated as follows, in relation to such a challenge, at [18]-[19]:

As we have described, before the FTT the parties agreed that the control requirement was satisfied, and the FTT agreed. Therefore, Ground 1 is relevant in this appeal only insofar as the FTT’s finding at FTT[111(6)] influenced its decision regarding the Third RMC Stage and/or its overall decision that IR35 did not apply.

We are satisfied that the finding at FTT[111(6)] was taken into account by the FTT in its decision regarding the Third RMC Stage, since it was specifically identified as a relevant factor at the Third RMC Stage by the FTT at FTT[134(6)]. As we will discuss below in relation to Ground 2, the extent of control in the hypothetical contract is itself a relevant factor, in any event, at the Third RMC Stage.

HMRC’s oral submissions on Ground 1 were ably provided by Mr Randle. Following the four stages in an Edwards v Bairstow challenge identified by the Court of Appeal in Georgiou, he argued as follows:

Mr Randle also pointed out that the FTT may have thought that the actual Contracts were varied as described, which would not have been permissible given that any variations had to be agreed in writing.

For SLB, Mr Collins argued that the FTT was entitled and correct to find that the contractual first call was varied so as to be subject to Mr Barnes’ newspaper commitments and coverage of high-profile matches over which Sky had no broadcasting rights. He referred to FTT[134(6)]:

He also referred to FTT[69(4)]:

Mr Collins said that the disputed finding was also based on ample evidence before the FTT from Mr Barnes, including paragraph 14 of his witness statement:

Mr Collins also said that HMRC’s argument relating to the need for a variation of the Contracts to be in writing missed the point, because the terms of the hypothetical contract can include terms based on the circumstances and the conduct of the parties.

The Upper Tribunal decision in HMRC v Atholl House Productions Ltd [2021] UKUT 37 (TCC) (“Atholl House UT”) provided guidance, which we gratefully adopt, regarding the approach which should be taken to the construction of the hypothetical contract. That guidance was very helpfully summarised by the FTT in Atholl House Productions Ltd v HMRC [2024] UKFTT 00037 (TCC) (“Atholl House Remitted”) at [21], as follows:

We deal first with the FTT’s reference in making the disputed finding to clause 1.1 of the Key Terms. This refers to “any variations agreed by the Parties in writing and to any Associated Company as may be agreed between the parties from time to time”. Unfortunately, this drafting is both confused and ambiguous. It can be read either as encompassing only variations agreed in writing between the parties (including any associated company of Sky), or as encompassing both variations in writing and non-written variations agreed from time to time. It appears from FTT[111(7)] that the FTT probably interpreted it as having the latter meaning, and that is made clear by the FTT’s reference at FTT[125(2)] to “clause 1.1 under the Key Terms which provided for the provision of services ‘subject to any variations agreed by the Parties in writing’ and ‘from time to time’”. HMRC’s position is that the clause has the former meaning, so that only variations agreed in writing are effective, leaving the words “as may be agreed between the parties from time to time” to refer only to the inclusion as a party of an Associated Company.

We consider that it is unclear which meaning should be attributed to clause 1.1, but that in the circumstances that issue is of limited relevance. That is because it is relevant to the construction of the Contracts themselves, whereas the disputed finding related to the terms of the hypothetical contract. The real question for the FTT was whether all the circumstances, including the conduct of the parties, justified a decision that in the hypothetical contract a particular written term in the Contracts would have been omitted, varied, modified or supplemented. Put another way, the inclusion in an actual contract of a provision providing unequivocally that no variations would be permitted unless in writing would, of course, be relevant to the construction of that contract, but it could not operate to prevent a conclusion that the terms of that contract would be modified in some way when construing the hypothetical contract, even though the modification had not been agreed in writing. That is clear from the guidance set out above from Atholl HouseUT.

In our view, the material question in relation to Ground 1 is the Edwards v Bairstow question of whether the FTT’s decision at FTT[111(6)] was one which was reasonably available to it on the evidence, or rather was (as HMRC say) irrational.

We agree with Mr Collins that there was sufficient evidence available to the FTT for it rationally to reach the decision which it did, including that to which he referred and which we set out above. The FTT’s findings of fact, including its acceptance of Mr Barnes’ evidence as to matters of fact, formed a rational basis on which to conclude that in the hypothetical contract the right of first call would be modified as set out at FTT[111(6)]. A judgment as to whether the parties’ mutual understanding and working practices went so far as to justify that modification in the hypothetical contract was one for the FTT to make on the basis of all the available evidence. We agree with the FTT’s statement, at FTT[104], that “the construction of a hypothetical contract remains an indispensable task for the tribunal as part and parcel of its fact-finding remit”.

HMRC suggested that the decision which it reached was not open to the FTT on the evidence because the FTT considered no instances of “flashpoints” or clashes between Sky and Mr Barnes which would have served to evidence the likelihood of a modification in the hypothetical contract. We do not agree. The reference in Atholl House UT to the helpfulness of “flashpoints” in this context (summarised at [40(7)] above) does not mean that a finding cannot reasonably be made in the absence of flashpoints. They are helpful but no more than that. In any event, as we pointed out in the hearing, FTT[81] and [82] refer to evidence of what might fairly be described as flashpoints, which formed part of the evidence available to the FTT on this issue.

In conclusion, we dismiss HMRC’s appeal under Ground 1. The determination of Ground 2 will, therefore, be made on the basis that the FTT’s finding at FTT[111(6)] stands.

The FTT agreed with the parties that the mutuality and control tests were satisfied. Its decision therefore turned on its evaluation of the Third RMC Stage. We set out below the direction which the FTT gave itself in carrying out that evaluation.

At FTT[134], the FTT set out twelve factors which it stated were relevant to the RMC Third Stage. We discuss each of these in detail below.

The FTT then set out its conclusion as follows, at FTT[135]:

HMRC appeal under Ground 2 on the bases that in reaching it conclusion on the Third RMC Test, the FTT:

Essentially, HMRC’s objection is that the FTT erred in the application of the Third RMC Stage because the twelve factors which it identified were not, individually or cumulatively, indicators against employment status, and because it failed to weigh in the balance other terms of the hypothetical contract which were strong indictors of employment status.

Mr Collins pointed out that in Northern Light Solutions Ltd v HMRC [2021] UKUT 0134 (TCC), the Upper Tribunal cautioned as follows, at [85]:

Mr Collins argued that an assertion by HMRC that a factor taken into account by the FTT was “neutral” was a complaint about weight, which was entirely a matter for the FTT, and not a point of law which gives a right of appeal. He said that the FTT’s twelve factors did indicate that Mr Barnes would not have been employed under the hypothetical contract, and the factors which HMRC claimed the FTT had failed to take into account were taken into account. The FTT’s self-direction as to the law showed that the FTT was fully aware of the factors to take into account at the Third RMC Stage. Even if the FTT did err, said Mr Collins, none of the errors was material to its decision.

The parties disagreed as to the nature of HMRC’s challenge under Ground 2. Mr Collins characterised it as a challenge to the FTT’s evaluative conclusion and an impermissible attack on the weight given by the FTT to different factors. Mr Stone accepted that the FTT’s overall conclusion was evaluative, but denied that HMRC were challenging weight, or any of the FTT’s primary findings or its overall conclusion. Rather, said Mr Stone, HMRC’s position was that errors of law arose because the FTT took into account irrelevant factors and failed to take into account material factors as required at the Third RMC Stage. This was not, he said, an Edwards v Bairstow attack.

Mr Stone referred to the decision in WM MorrisonSupermarkets PLC v HMRC [2023] UKUT 00020 (TCC) (“Morrisons”). In that case, the parties disagreed as to what constituted an error of law in a multi-factorial assessment where the FTT failed to take into account a material factor. The Upper Tribunal discussed the well-established principle that an appellate tribunal should be slow to interfere with an evaluative multi-factorial assessment, but then said this, at [34] (emphasis in original):

In Morrisons, HMRC argued that an error of law arose only where the relevant matter was one which no tribunal properly instructed would have left out of account, so the decision was “perverse”. The Upper Tribunal disagreed, stating (at [39]) “while a requirement to show the decision is perverse applies in relation to matters of weight/evaluation, failing to take account of a relevant factor or taking an irrelevant factor into account will constitute an error of law (albeit there will be subsequent issue of whether any such error is material to the decision in question)”. At [43], the Upper Tribunal stated that while a perversity hurdle must be surmounted where the challenge concerns the factual issue of whether a factor was probative on the facts of the case, a challenge as to whether a factor was relevant, as a matter of principle, does not face such a hurdle, and is a question of law.

We agree with the distinction drawn in Morrisons, described above, and have approached Ground 2 on the basis that HMRC’s challenge is not that the FTT afforded to much or too little weight to a factor, or that its overall conclusion was perverse or irrational, but rather that the FTT took into account at the Third RMC Stage factors which were as a matter of principle irrelevant, or failed to take into account at the Third RMC Stage factors which were as a matterof principle relevant. In the context of this appeal, relevance is determined by reference to whether a factor is indicative of employment status. It is important to state at the outset that even if we find that the FTT made such an error, we must still determine whether that error was material to its decision; we discuss this below.

The first question is whether the FTT correctly directed itself in law in addressing the Third RMC Stage. We have set out above, at [8]-[10], the overall approach which should be adopted in determining whether IR35 applies, and the context in which the Third RMC Stage falls to be considered. In relation to the Third RMC Stage, the Court of Appeal in Kickabout said (at [104]) that “the court’s task at that stage is to examine all relevant factors, both consistent and inconsistent with employment, and determine, as a matter of overall assessment, whether an employment relationship exists.”

The FTT directed itself as to the approach which it should take at FTT[130] and [133], as follows:

We consider this to be a very helpful and accurate summary by the FTT of the approach which should be taken at the Third RMC Stage.

Therefore, we are mindful in approaching Ground 2 of the guidance given by the Court of Appeal in DPP Law Ltd v Greenberg [2021] EWCA Civ 672:

We must nevertheless decide whether, looking at the decision in its entirety, the FTT in fact failed to follow its self-direction in some material respect (Footnote: ⁵).

Having directed itself as to the applicable principles, the FTT then stated at FTT[134] “With these precepts in mind, the factors in the present case relevant to my consideration at the third stage of the RMC test are as follows”. The FTT then set out twelve factors. Although it is not made explicit in the decision, it is apparent from the discussion of those factors and also from its subsequent conclusion (that IR35 did not apply notwithstanding that mutuality and control were present) that the FTT considered that each of these twelve factors suggested or supported a conclusion that the hypothetical contract would not have been one of employment.

We now consider whether each of the twelve factors was, as matter of principle, indicative or supportive of a conclusion that the hypothetical contract would not have been one of employment.

These were set out at FTT[134(1) and (2)]:

The FTT is here pointing out the distinction that Mr Barnes’ role was as a pundit providing occasional expert comments, by contrast to Mr Harrison, who was the lead commentator for a match. We note that although the FTT described Mr Harrison as a “presenter”, Sky described him as a commentator: at FTT[46], Sky’s response to being asked to comment on the respective work arrangements of Mr Harrison and Mr Barnes was recorded as follows:

The FTT did not indicate, explicitly or implicitly, why it considered that this point was relevant to the question of whether the hypothetical contract would have been one of employment.

The distinction would have meant that Mr Barnes would speak for less time than Mr Harrison during a match, and the different role he was performing might arguably have required a type of expertise or experience not possessed by Mr Harrison. Mr Collins suggested that the first two factors were relevant to the FTT’s finding elsewhere that Mr Barnes was carrying on an enterprise of being “StuartBarnes, the voice of rugby”: FTT[134(9)].

HMRC said that (1) a requirement to deploy individual skill and personality is frequently present in a contract of employment: see, for example, Market Investigations at 188B, (2) Mr Barnes was engaged under the hypothetical contract to provide various services, not just punditry, and (3) in PD & MJ Limited v HMRC [2024] UKFTT 00038 (TC) (“PD”) the FTT rejected the submission that the fact that a sports pundit gives his own opinions in television commentary is inconsistent with employment status.

In our opinion, the first two factors were, as a matter of principle, not factors pointing away from employment. We do not know from the Decision what point the FTT had in mind here, but we consider that there was no rational basis on which the difference in the roles performed by Mr Barnes and Mr Harrison during a match commentary suggested that the hypothetical contract was less likely to be one of employment. As the Court of Appeal put it in Atholl House, at [128], “It is not the activities that matter but the capacity in which, and the conditions under which, they are performed.”

This was set out at FTT[134(3)]:

The FTT appears to have considered that the fee payable by Sky did not resemble a “salary” in nature because the contract did not stipulate the minimum days of service; that it was relevant that Sky were prepared to pay a premium for the exclusive right to Mr Barnes’ services, and that it was relevant that Sky were aware that Mr Barnes could appear on air for less than the maximum period under the contract.

Mr Stone said in his skeleton argument that “payment of a fixed fee in equal monthly instalments, paid irrespective of days worked…was consistent with employment status, and certainly not inconsistent with it”. We agree. The fact that the payments received under the hypothetical contract effectively had some characteristics of a retainer was not, as matter of principle, indicative that the relationship was not one of employment. Nor was Sky’s awareness that in practice Mr Barnes might not be called on to appear on air to the full extent of Sky’s entitlement under the hypothetical contract. Those factors were in our view equally consistent with a contract for service and a contract for services.

At FTT[134(4), (5) and (9)], the FTT stated as follows:

The FTT considered it relevant that Mr Barnes was free, and even encouraged by Sky, to exploit his work product for other businesses. The FTT also considered it relevant that there was no demarcation between the preparation and work which Mr Barnes did for Sky and that which he did for other businesses; it was all part of the same enterprise.

The terms in which the FTT expressed these factors, particularly Factor (9), suggest that the FTT may have fallen into the sort of error found by the Court of Appeal in Atholl House to have been committed by the Upper Tribunal in Atholl House UT, namely of approaching the Third RMC Stage by carrying out a comparison of the business carried on by the taxpayer outside the relevant hypothetical contract and that carried on under that contract. However, any such error would be a different error from that asserted by HMRC under this element of Ground 2, because HMRC’s argument under Ground 2 is that the twelve factors identified were irrelevant, since as matter of principle they were not indicators pointing away from an employment relationship under the hypothetical contract.

We consider that Factors (4), (5) and (9) were, as a matter of principle, capable of being indicators that the relationship under the hypothetical contract was not one of employment. In principle, an ability on the part of the individual to create and immediately exploit intellectual property generated in providing the services under a hypothetical contract in business activities outside the hypothetical contract points towards a contract for services rather than a contract for service.

FTT[134(6)] stated as follows:

As explained above, it is in our view unclear whether non-written variations to the Contracts were permitted by the terms of clause 1.1 of the Key Terms, but we do not consider that question is material to the findings of fact underpinning Factor (6). Since we have dismissed HMRC’s appeal under Ground 1, it follows that the FTT’s findings of fact in relation to Factor (6) stand.

Mr Stone argued that a co-operative relationship is not inconsistent with an employment relationship, and such a relationship has been found to exist in a number of IR35 decisions which have found that the relationship would have been one of employment.

We agree with Mr Stone that the mere existence of a co-operative working relationship does not of itself point away from employment. However, Factor (6) goes further than referring to co-operation, because it describes the working agreement with Sky as to Mr Barnes’ availability to perform services under the hypothetical contract. In our view, this is a factor which is, as matter of principle, a pointer away from employment, in particular as it goes to the extent of control, which is a relevant circumstance at the Third RMC Stage.

FTT[134(7)] stated as follows:

Mr Stone argued that the FTT’s central premise, that it would be most unusual for an employer regularly to interview an employee, was perverse, and based on no specific or general evidence; it is no more or less likely that a person who is interviewed by a broadcaster which engages them for their expertise is engaged on an employed or self-employed basis.

We agree with Mr Stone. We are puzzled as to why the FTT considered that this was a “strong indicator” that the relationship was not one of employment. We do not consider that, as matter of principle, it pointed one way or the other.

This factor was set out at FTT[134(8)]:

Mr Stone challenged the basis for the FTT’s finding that Mr Barnes was in business on his own account outside his contract with Sky, because, he said, the 31 articles were an insufficient evidential basis for that finding.

Properly understood, HMRC’s challenge to Factor (8) is not that as matter of principle being in business on own account cannot be a factor pointing away from employment, but rather it is a disguised Edwards v Bairstow challenge to the rationality of the finding. It was a finding clearly made by the FTT, and repeated at FTT[136]. It was, in any event, not a finding based solely on the 31 articles (which the FTT described as illustrative of the competitiveness of the world of punditry) but on all the evidence and arguments referred to throughout the Decision.

This was clearly a relevant factor at the Third RMC Stage.

This was set out at FTT[134(10)]:

Mr Stone argued as follows:

We agree with Mr Stone that Factor (10) was not, as matter of principle, a pointer away from employment under the hypothetical contract. The opportunity for Mr Barnes to profit from efficient use of time in his overall business sheds no light on the question at the Third RMC Stage, which is whether in all the circumstances the hypothetical contract would have been one of employment.

At FTT[134(11)], the FTT said this:

The decision in BBL has now been remitted to the FTT following an appeal to the Upper Tribunal (HMRC v Basic Broadcasting Limited [2024] UKUT 00165 (TCC)), but, in any event, the FTT in BBL went on to say, in the passage referred to at Factor (11), that “[H]owever, this is the sort of risk that applies to every presenter, whether they are employed on a fixed-term contract or as a self-employed contractor”: [350].

In agreement with the FTT in BBL, we do not consider that the reputational risk faced by Mr Barnes which the FTT found to exist was an indicator, as a matter of principle, that he would not have been employed under the hypothetical contract.

The final factor referred to by the FTT was at FTT[134(12)]:

Mr Stone described this as perverse finding, given that the Sky income was 60% of SLB’s turnover. He also argued that, on the basis of Atholl House, this was not a permissible factor to be taken into account, because the precise percentage could not have had not been shown to be known to Sky at the time when the hypothetical contract began. Finally, he said that the reference to what happened in 2019 was again inadmissible as it related to a period after the hypothetical contract.

We do not agree that the FTT’s finding was perverse, particularly given that in absolute terms the income from non-Sky sources exceeded £150,000 in each year in the relevant period: FTT[65]. It was within the range of reasonably available decisions, particularly since “financial dependency” is a somewhat elastic concept.

We accept that, following Atholl House, a fact must have been known or reasonably available to both parties in order to form part of the admissible factual matrix at the Third RMC Stage. However, in this case Sky will have been aware of Mr Barnes’ most significant work commitments outside his Sky contracts, namely his regular columns for the Times and Sunday Times. It is clear that, as matter of principle, financial dependency is a relevant factor. In Hallv Lorimer, Nolan LJ stated that “the extent to which the individual is dependent upon or independent of a particular paymaster for the financial exploitation of his talents may well be significant”: [1994] 1 WLR 209, at 218C. We consider that the FTT was entitled to take this into account as a relevant factor.

In conclusion, we consider that the FTT made no error of law in taking into account Factors (4), (5), (6), (8), (9) and (12), but that it did err in law, for the reasons set out above, in taking into account at the Third RMC Stage Factors (1), (2), (3), (7), (10) and (11).

In determining whether this means that we must set aside the FTT’s decision on this issue, it is necessary to decide whether the errors of law were material. In this context, we agree with the Upper Tribunal in Morrisons (at [75)] that the relevant principles as to materiality are those set out in Degorce v HMRC [2017] EWCA Civ 1427 (“Degorce”). In that case, Henderson LJ said “ I find it difficult to envisage circumstances in which the Upper Tribunal could properly leave the decision of the FTT to stand, once it is satisfied that the error of law might (not would) have made a difference to that decision.” (Footnote: ⁶) Applying that approach, we have concluded that it might have made a difference to the FTT’s decision to allow the appeal if it had not taken into account Factors (1), (2), (3), (7), (10) and (11). Other than the statement in relation to Factor (7) that it was a “strong indicator” of non-employment status, we cannot determine the weight given by the FTT to the twelve factors, so we must conclude that the errors of law in relation to six of those factors might have made a difference to the FTT’s decision.

We therefore set aside the FTT’s decision. We discuss below the disposition of the appeal after we have discussed the second limb of Ground 2.

HMRC also assert under Ground 2 that in reaching its decision on the Third RMC Stage, the FTT erred in law by failing to take into account a number of important factors which were consistent with employment under the hypothetical contract. In particular, say HMRC, the FTT failed properly to take into account the following factors which point towards employment:

Mr Collins argued that the FTT did not fail to take into account any of these matters. He points to the statement at FTT[135] (emphasis added to original):

Mr Collins also relied on the FTT’s self-direction at FTT[130] referring to the need to weigh all the terms and address all relevant factors. He argued that the fact that the FTT italicised certain provisions of the Contracts showed that it understood the importance of those provisions. He emphasised that the FTT need not deal with every argument or spell out its reasoning in great detail.

Mr Stone characterised this aspect of Ground 2 in the same manner as Ground 1, namely as being a challenge that the FTT had erred in law by failing to take into account relevant factors, and the error was material to its decision.

In a broader sense the challenge raises the wider issue of how the FTT could and should approach the Third RMC Stage. In the many decisions reached on IR35, a wide variety of approaches have been adopted by the FTT and Upper Tribunal. In some cases, the approach has been to identify and discuss those factors pointing towards employment, those factors pointing away from employment and those factors which might be described as neutral, and then to either carry out a balancing exercise, or, in some instances, simply to state a conclusion. In other cases, the approach has been more impressionistic, identifying the “bigger picture” leading to a conclusion as to employment status. In several cases, the discussion of the Third RMC Stage has focussed on whether the individual was in business on their own account, and the relationship between services provided inside and outside the hypothetical contract.

Without wishing to lay down a prescriptive template, it may be helpful, given the divergent approaches which have been taken, to offer some general guidance as to how the Third RMC Stage should be approached.

We consider that the following principles can be discerned from the authorities in approaching the assessment of the Third RMC Stage in an IR35 case:

In its decision refusing permission to appeal, the FTT did not address HMRC’s argument that it had failed to take into account relevant factors consistent with employment.

There are a number of points which weigh against HMRC’s case under the second limb of Ground 2. First, the FTT correctly directed itself as to the proper approach, including the need to take all relevant factors into account, so we should be slow to conclude that it has not followed that self-direction. Second, Mr Collins meticulously took us through the FTT’s findings which preceded its discussion of the Third RMC Stage, and these included findings in relation to almost all of the issues identified by HMRC. Third, the FTT stated at FTT[135] that, in reaching its conclusion, it had had regard to “ the cumulative totality of the provisions in the hypothetical contract in the context of the parties’ conduct and intention”.

However, we have, with regret, concluded that in this case the FTT did not properly follow its self-direction to “weigh any terms which are contrary to a conclusion of employment against those terms, including mutuality of obligation and control, which favour a conclusion of employment” (FTT[130(1)]) and to keep in mind “the centrality of the contractual relationship in issue” with the focus remaining “anchored on the contract” (FTT[133]). As a result, it erred in law.

We have reached this conclusion for two reasons. First, the twelve factors which the FTT identified as “relevant” at FTT[134] mostly focus not on the terms of the hypothetical contract, but on the circumstances in which that contract operated in practice. That indicates a failure to keep the hypothetical contract at the centre of the enquiry. Second, more importantly, there is no indication or reasoning given by the FTT in its consideration of the Third RMC Stage to explain (1) what it considered to be the terms of the hypothetical contract which favoured a conclusion of employment or (2) why those terms were in its view outweighed by terms or circumstances to the contrary. In those circumstances, we do not consider that the FTT’s reference tothe cumulative totality of the provisions in the hypothetical contract in the context of the parties’ conduct and intention was adequate to address this deficiency.

We cannot say with any confidence that the FTT’s decision might not have been different but for this error, so it was in our opinion material. We therefore set aside the FTT’s decision under this limb, as well as the first limb, of Ground 2.

Since we have set aside the FTT’s decision, we must decide whether to remake it or remit it.

There is no challenge by HMRC to the FTT’s findings of primary fact, and their only challenge relevant to the FTT’s findings as to the terms of the hypothetical contract was pursuant to Ground 1, which we have dismissed. Therefore, we consider that we can and should remake the FTT’s decision. We do so on the assumptions that the FTT’s findings of fact, its findings as to the terms of the hypothetical contract and its conclusions regarding the mutuality and control tests, are undisturbed. It follows from our finding in relation to the first limb of Ground 2 that we also assume that of the twelve factors identified by the FTT at FTT[134], Factors (4), (5), (6), (8), (9) and (12), and only those factors, are in principle capable of pointing away from a relationship of employment under the hypothetical contract.

So, since mutuality and a sufficient framework of control are both present, the decision turns on the evaluation of the Third RMC Stage. We take into account the principles we have set out above regarding how that evaluation should be approached. We begin with the material terms of the hypothetical contract, as found by the FTT at FTT[111] and set out in the appendix to this decision.

We consider that the following terms of the hypothetical contract are the most significant terms which are more consistent with a relationship of employment:

We consider that the following terms of the hypothetical contract are the most significant terms which are more consistent with a relationship other than employment:

We consider that the other provisions of the hypothetical contract are broadly neutral, or not material, in terms of the status of the relationship under that contract.

HMRC argued that the extent of Sky’s control over Mr Barnes under the hypothetical contract was a material indicator of employment status. The FTT found that a sufficient framework of control existed, which is the correct test for the control limb of RMC, but on balance we are not persuaded that the extent of the control was a material indicator of employment. The type and nature of control over Mr Barnes was indeed broad, but in our opinion Sky’s rights in this respect were rights which it would have sought to impose on someone in the position of, and with the role of, Mr Barnes whether he was an employee or a contractor.

In terms of the circumstances relevant to the hypothetical contracts, we consider that the following were of relevance:

Drawing together these issues, and standing back to look at the picture created, we have concluded that the relationship under the hypothetical contract would have been one of employment.

The long duration of the contract, the absence of a right of substitution, the right of first call for 228 days a year (as varied), the rights of exclusivity, the absence of financial risk and the overall length of the relationship with Sky are factors which in our opinion collectively outweigh the right of Mr Barnes to exploit his work product, his agreement regarding availability and the fact that he was in business on his own account outside his relationship with Sky. The evaluation of all relevant admissible factors required at the Third RMC Stage leads us to conclude that the relationship would have been one of employment.

Finally, we asked the parties at the hearing for further written submissions, which were duly provided, on the question of whether, were we to set aside and remake the decision, we should take into account the fact that there was an express provision in the Contracts stating that (broadly) the intention of the parties was that Mr Barnes would not be an employee of Sky. The FTT did not in fact make any express finding as to whether a similar provision would have been included in the hypothetical contract, although it stated at FTT[135] that it had given no weight at the Third RMC Stage to the inclusion of such a provision in the Contracts. It is well established that such a provision is only likely to be relevant (and even then given limited weight) in a borderline case: Dragonfly Consultancy Ltd v HMRC [2008] EWHC 2113 at [54]-[55]. We have not found this to be a borderline case, so we have reached our decision without reference to such a clause, were it to have been present in the hypothetical contract.

HMRC’s appeal under Ground 2 is allowed, and we set aside the FTT’s decision and remake it to dismiss SLB’s appeal.

The contract would be for a fixed term of 4 years, extendable by another 2 years to coincide with the expiry of Sky’s rights to broadcast the European International Championship, and subject to further renewal by mutual agreement.

Mr Barnes would be contractually obliged to personally perform the ‘Services’ as the named Personnel under the Key Terms.

Mr Barnes had no right to provide a substitute when he was unable to provide the required services personally. Sky would choose and arrange for any substitute and would pay the substitute directly.

The Services to be provided by Mr Barnes would comprise:

Sky ‘shall have first call’ on Mr Barnes’ Services up to 228 days per annum, which would be inclusive of days being on air of around 90 to 120 days per annum.

The exercise of the ‘first call’ right by Sky would be subject to Mr Barnes’ availability in conjunction with his standing commitments to the newspaper columns, and in co-ordination with Mr Barnes’ coverage of high-profile matches of which Sky had no broadcasting rights, (such as the coverage of the Six-Nations, British & Irish Lions, and World Cup matches would take priority over Sky’s fixtures).

Such variations to the provision on ‘first call’ were expressly provided by clause 1.1 under the Key Terms in the First Contract: ‘The Services will be provided on the terms set out in this Agreement subject to any variations agreed by the Parties in writing and to any Associated Company as may be agreed between the parties from time to time.’

Sky would have exclusive right of Mr Barnes’ services as a broadcaster within the UK. Mr Barnes would not be permitted to render his services to another broadcaster, or radio, and/or all media organisations without the prior written consent of the Head of Sky Sports. Such consent would not be unreasonably withheld, such as consent for Mr Barnes to broadcast during the World Cup season for a broadcaster outside the UK. In the event of any breach of Sky’s exclusive right to Mr Barnes’ services in this respect, Sky would be entitled to injunctive relief.

Sky would have the right to allocate Mr Barnes from the roster of commentators to cover a specific game to be broadcast by Sky Sports. To that extent, Sky had control over the location, the date, and which match Mr Barnes would cover, subject to any reasonable alternatives being suggested by Mr Barnes, whether it be location (such as not covering matches in Scotland in two consecutive weekends) or the interest of the match (such as switching to cover La Rochelle v Harlequins on Mr Barnes’ suggestion).

The contract would be terminable pursuant to clause 5, which would give Sky the right to terminate the contract ‘with immediate effect at any time’ if in Sky’s ‘reasonable opinion’ any of the stipulated conditions had obtained.

Sky would pay Mr Barnes the annual fee of £235,000 in 2013-14 with an increment of £10,000 per annum to £265,000 in 2016-17 as stated in the Key Terms, and thereafter the annual fee would remain at £265,000 for the two years to 31 May 2019. The fee would be payable in equal monthly instalments in arrears upon the rendering of an invoice by Mr Barnes.

The annual fee payable by Sky would be fixed in advance, and would not be calibrated to the actual number of days Mr Barnes would be on air for Sky.

In relation to programme content, Sky would expect Mr Barnes to adhere to the running order of the live match, and to work to the direction and instructions of the executive producer, whether it be for Sky Sports, Sky News, or for Sky Sports News. The content of the pre-match broadcast, and of the live commentary would be Mr Barnes’ sole responsibility, subject to prior clearance with the executive producer in relation to the themes to be covered.

As with the commentary for live matches, the content of any interviews given to Sky News, and Sky Sports News, or in relation to the Monday Column, and the Rugby Club, would be content solely created by Mr Barnes.

Mr Barnes would be subject to restrictions in relation to the handling of confidential information (clause 6) and non-solicitation (clause 7) and restrictions as to the provision of his Services outwith Sky as set out under the ‘non-compete’ undertakings at paragraph 4.2 of the NDA Schedule.

Mr Barnes would carry out his research, write his own script, and adhere to the Ofcom Guidelines in relation to the Services he would perform in presenting a Sky programme. In other aspects of the delivery of his Services, Mr Barnes was expected to work under the direction of Sky’s production manager in charge of the programme. Sky would have full editorial control over any programme and Mr Barnes would have to follow the reasonable requests of the executive producer, such as who to interview.

Sky would provide all necessary studio equipment during the live streaming of a sport event in which Mr Barnes provided his Services, including microphone and earpieces, and the necessary travel and accommodation bookings to enable location performance of the Services to take place. Sky would reimburse any reasonable expenses claimed by Mr Barnes, upon submission of receipts and if approved by Sky.

Mr Barnes would agree to assign to Sky all rights (intellectual property, copyright, etc) to enable Sky to have the exclusive rights in the commercial exploitation of his output emanating from presenting for Sky Sports.

Mr Barnes would have to seek permission from Sky before engaging in any new commercial activities. He would agree not to exploit his image rights in any manner, or to undertake any assignments from other broadcasters, or media outlets, that would cause a breach of the ‘non-compete’ restrictions pursuant to the Non-Disclosure Agreement.

Pursuant to clause 3.4, the Fixed Fee per annum would be agreed on the basis as to include a sum to satisfy Mr Barnes’ ‘paid holiday entitlement’ under the Working time Regulations 1998. Mr Barnes would have no contractual rights (over and above those rights granted by statute), to be paid for absences caused by sickness.