Self-employment cannot be used as a tax smokescreen for contracted employees

Employers and business owners engaging contractors or consultants, including through personal service companies. A tribunal-led reminder that labelling an engagement as “self-employed” does not override the reality of the working relationship for tax purposes. Where HMRC successfully challenges employment status, businesses can face retrospective PAYE and National Insurance Contributions (NICs), interest, and penalties.

Case background: employment status and off-payroll rules

A complex celebrity case arose recently in which the First-tier Tax Tribunal (FTT) was asked to consider the application of the intermediaries’ legislation (IR35), otherwise known as off-payroll working, to payments made by Manchester United Football Club (MUFC) to Bryan Robson Ltd. This appeal was in relation to determinations of income tax made under Reg. 80 of the PAYE Regulations and s31 of the Taxes Management Act (TMA) 1970 for personal appearances provided to MUFC by Bryan Robson Ltd. as a ‘global ambassador’ from 2015/16 to 2020/21. Those agreements included a licence for MUFC to exploit Mr. Robson’s “image rights” and required the former England star to make 35 personal appearances per year at MUFC’s request for a fixed sum. Although the image rights were not subject to the IR35 legislation and were left to be decided separately, and the additional tax due under the IR35 rules is to be determined. This technical tax case highlights the intricate factors that determine employment status under IR35 and anyone providing such personal services, including freelancers, content creators, and contractors, has to demonstrate a high level of autonomy to be considered truly self-employed and present watertight contracts to HMRC.

Why this case matters for employers

This decision reinforces a long-standing principle in UK tax law: employment status is determined by substance, not labels. Even where services are provided through a company and described as self-employment, HMRC and tribunals will examine the underlying reality of the engagement. For businesses, the key takeaway is that contractual wording alone is not decisive. If the working arrangement points toward employment-like control, obligation, or integration, IR35 and PAYE consequences can still arise.

Risks and consequences of getting status wrong

Where HMRC concludes that a contractor should have been treated as an employee, businesses may face:

• Retrospective PAYE income tax assessments
• Employer and employee Class 1 NICs
• Interest on underpaid tax
• Penalties where HMRC considers the error careless or deliberate
• Wider scrutiny of other contractor arrangements

HMRC guidance makes clear that employment status decisions are fact-specific and may be challenged where arrangements are structured primarily to avoid tax.

HMRC: Check Employment Status for Tax (CEST)

In practice

In practice, we often see businesses rely on “self-employed” labels or company structures without fully testing whether the day-to-day working reality supports that position. Tribunal decisions like this one show that HMRC will look closely at control, expectations, and the commercial nature of the relationship — not just the paperwork.

Local support for businesses

For tailored support, speak to experienced accountants in London who advise businesses engaging contractors across a wide range of industries. Our team helps employers review engagement models, assess IR35 exposure, and address HMRC concerns before they escalate.

Review whether your engagement model risks HMRC challenge

If you are unsure whether your contractor arrangements genuinely reflect self-employment — or whether HMRC could challenge the status — a focused review now can help prevent unexpected tax liabilities and disputes later.