A new year. A new Cabinet. As exciting as the comings and goings into No. 10 can be during a reshuffle, the tax community can take some relief that the ministers responsible for tax are largely unchanged.
The Chancellor and the lead tax minister, the Financial Secretary to the Treasury, have held on to their posts. One change is Robert Jenrick MP who has been appointed as Exchequer Secretary to the Treasury. He takes over the brief from Andrew Jones MP and covers indirect taxes (amongst other items), supporting Mel Stride MP, the Financial Secretary to the Treasury.
During a period of extensive change to the tax system, having some stability within the Treasury ministerial team is beneficial. The good news we take from this is a continued commitment to the 2015 business tax roadmap and the new tax policy-making cycle (meaning fewer fiscal events). Familiarity with the recent measures announced at the Autumn Budget should be of value as the latest Finance Bill moves through the Houses. For the time being at least, this means we can expect more of the same.
The Court also considered circumstances relevant to the hypothetical contract:
- Mr Barnes was in business on his own account outside of his role with Sky, which was a relevant factor at the "Third RMC Stage";
- Mr Barnes worked for Sky for over 20 years up to the period under appeal, and such a long relationship was consistent with a relationship of employment; and
- Mr Barnes' income from Sky averaged approximately only 60% of his total income over the period. As the remaining 40% of his income represented a substantial amount, the financial dependence factor did not point away or towards employment status.
On balance, the UT concluded that the relationship under the hypothetical contract was one of employment. Mr Barnes was therefore within the scope of the IR35 rules and PAYE and National Insurance contributions should have been withheld by SLB from his Sky income and paid to HMRC.
Adding in new table
| Heading | Heading | Heading |
| Wording | Wording | Wording |
| Wording |
Adding in new accordion
Accordion 1
Wording
Accordion 2
Wording
Conclusion
The S&L Barnes Ltd case is a very useful decision on the application of the test at the “Third RMC stage”, as it considers in detail not only the factors that commonly arise in borderline cases that are not obviously either employment relationships or self-employment relationships, but also the correct approach to the overall assessment of those factors. It should be required reading for the FTT to which the Supreme Court’s decision in HMRC v Professional Game Match Officials Ltd is remitted.
Factors considered by the FTT
| Factors | FTT judgment | UT judgment |
| Factors (1) and (2) | The distinction between a presenter (Mr Harrison) and a commentator (Mr Barnes) should be considered. Mr Barnes was performing a different role which required a type of expertise or experience not possessed by Mr Harrison. No specific judgment was given on employment status. | Disagreed – factors (1) and (2) do not point away from employment. The FTT provided no rational basis on which the difference in the roles suggested that the hypothetical contract was not one of employment. |
| Factor (3) | An annual fee (with no minimum days of service) did not resemble a “salary” and is therefore consistent with self-employment. | Disagreed – a fixed fee payable in equal instalments (irrespective of the days worked) is consistent with employment status. |
| Factors (4), (5) and (9) | The fact that the material Barnes used to provide his services to Sky remained his intellectual property (4), Barnes could reproduce the materials used for Sky in newspapers (5), and there was no demarcation between his work for Sky and newspaper columns (part of the same enterprise) (9) is consistent with self-employment. | Agreed –these factors are capable of pointing away from employment (specifically the ability to exploit intellectual property). |
| Factor (6) | The working agreement with Sky (specifically because Barnes had freedom in providing his availability to Sky and could dictate when he would be unavailable for certain events) pointed towards self-employment. | Agreed – this factor points away from employment. |
| Factor (7) | Sky Sport News interviewing Barnes strongly indicated that the relationship was not one of employment. | Disagreed – this factor does not indicate whether a relationship is one of employment or not. |
| Factor (8) | Barnes conducting business on his own account outside of his Sky commitment pointed towards self-employment. | Agreed – this factor points away from employment. |
| Factor (10) | The opportunity to profit through the efficient use of his time pointed away from employment. | Disagreed – this factor does not point away from employment. |
| Factor (11) | The reputational risk for Barnes whenever he appeared on air for Sky pointed towards self-employment. | Disagreed – this reputational risk is relevant for every presenter, whether employed or self-employed. It is not an indicator of self-employment. |
| Factor (12) | The fact Barnes was not financially dependent on Sky as his income from non-Sky activities was substantial, pointing towards self-employment. | Disagreed – FTT was entitled to consider this as a relevant factor, but the factor did not point one way or another in terms of employment. |
The Report’s findings
Concurrency as a model
The majority of stakeholders that engaged in the CMA’s review were supportive of concurrency. Whilst a small number considered it to be less effective at promoting competition in the regulated sectors than exclusive CMA enforcement, overall the CMA considered there to be stronger arguments to suggest that concurrency supports “more and more effective enforcement”.
The CMA considered that the following features supported this conclusion: the sharing of complementary skills and knowledge; additional capacity and coverage in the competition regime; and improved detection and case selection. The Report is, nevertheless, nuanced in acknowledging that there are some factors that may discourage sector regulators from exercising their concurrent powers, and in recognising that there is scope for improvement.
Scope for improvement
The second section of the Report separately considers specific improvements, across three themes:
- the sector regulators’ capacity for the exercise of their concurrent powers;
- the priority that sector regulators give to CA98 enforcement; and
- cooperation between sector regulators and the CMA on markets work.
1. Capacity
The Report identifies a disparity between sector regulators regarding the availability and expertise of staff to enable effective CA98 enforcement. For example, the CMA notes that generally the FCA and Ofcom are better resourced than their peers. For other regulators, competition enforcement may be “even more resource intensive”, as they may have to re-acquaint themselves with the enforcement process and train staff before exercising their competition powers. In some instances, they may also have to supplement in-house expertise with external advice. This may contribute to lower levels of enforcement overall.
To overcome these challenges, the Report sets out the following main recommendations:
- Secondments: to promote case support and sharing of know-how and expertise, regulators should consider increasing the use of secondments between each other (not just to/from the CMA). Secondment opportunities should also be included as a standing item at UKCN meetings so that regulators can highlight their resource needs.
- Internal reorganisation: regulators may learn from each other’s approach to the internal organisation of staff – particularly the presence of specialised competition enforcement teams (as maintained by the FCA and ORR). While not expressly stated, the Report appears to suggest that maintaining a specialist competition team is more effective.
2. Priority given to CA98 enforcement
Whilst the Report acknowledges that competition enforcement is one of numerous tools available and that regulatory enforcement may sometimes be preferable (particularly as CA98 investigations can be very lengthy), the CMA believes that CA98 enforcement may not be being prioritised by regulators due to:
- a lack of familiarity with CA98 enforcement at senior levels within the sector regulators;
- the relatively diffuse impact of CA98 enforcement (including its deterrent effect), when regulatory enforcement may be more noticeable within the given sector; and
- the discretionary nature of CA98 enforcement, in the context of acute pressure on resources.
To overcome these issues, the CMA recommended the following:
- Sharing best practice: sector regulators should share best practice and consider ways to improve their pipeline of potential cases, including through a new UKCN workshop convened by the CMA.
- Deterrence: sector regulators should be made more aware of the deterrent effects of CA98 enforcement, to help inform future prioritisation decisions. This can be articulated through the UKCN.
- Advocacy: the CMA should continue to advocate for sector regulators to make effective use of their concurrent powers, including by sharing approaches and resources.
3. Cooperation on markets work
The sector regulators have concurrent powers to carry out market studies under EA02 and refer markets to the CMA for formal market investigations (even without first conducting a market study)3. If a sector regulator opens a market study or makes an MIR in its given sector, the CMA cannot exercise the same function in relation to the same matter (and vice versa).
Some stakeholders commented that cooperation between the CMA and sector regulators was under-developed in this regard, and that MIRs had been made in cases that were inappropriate (or not made when they should have been). Further, in relation to the three market investigations the CMA has conducted in the regulated sectors (retail banking, energy, and investment consultants), some stakeholders considered that the CMA had been overly involved in implementing and monitoring the remedies.
To address these concerns, the CMA made the following recommendations:
- Greater engagement: More focus should be placed on markets work in bilateral meetings between regulators and the CMA, to identify where closer engagement will be of most value.
- Clearer expectations: Upfront expectations should be set as to how the CMA and sector regulators will cooperate on markets work, including on the sharing of their provisional thinking at various stages of their investigations. This can be done as part of the CMA’s intended update of the Memoranda of Understanding between the CMA and the sector regulators (the CMA did not think there was a case for for new statutory rules on cooperation, akin to those which exist for CA98).
Commentary
Whilst the Report identifies certain growing pains and a need amongst the sector regulators for more resources and transparency, there is no suggestion that a wholesale overhaul of the concurrency regime is warranted. Indeed, the CMA concludes that “on balance, competition in the regulated sectors is being promoted more effectively than it would be under an alternative model”. We can, therefore, expect more of the same from the CMA and concurrent sector regulators, albeit with greater communication and cooperation between them.
As to whether the Report’s recommendations will lead to more enforcement, only time will tell. Inter-regulator secondments may not be enough to address deficiencies in enforcement capacity and/or expertise. And even regulators such as the FCA, with large, dedicated competition enforcement teams, have not successfully concluded many cases (two in a nearly 10-year period in the FCA’s case)4. A tendency to prioritise regulatory action persists despite regulators long having been obliged to first consider using CA98 enforcement. It remains to be seen whether advocacy by the CMA will be sufficient to address this reticence.
/Passle/5a1c2144b00e80131c20b495/SearchServiceImages/2023-04-28-14-44-18-743-644bdbc2474c4c94b77286c8.jpg)
/Passle/5a1c2144b00e80131c20b495/SearchServiceImages/2018-01-10-5-21-30-401-5a564b9a3d947616fc9fa6ee.jpg)