Lorraine Kelly has escaped a £1.2 million tax bill after a judge described her as an ‘entertaining lady’ who is her own boss.
Kelly, 59, locked horns with the tax authorities over claims that the company through which she provides her services to broadcasters is just a front.
In 2016 HM Revenue and Customs presented her with an income tax bill for almost £900,000, plus national insurance contributions of over £300,000.
Lorraine Kelly (pictured in London on March 1 , left, and on her TV show on ITV, right) has escaped a £1.2 million tax bill
A vision: Lorraine was born and raised in Glasgow but has been familiar with the City of Discovery since meeting her husband Steve Smith in the 1980s. The house was put on the market by Savills in April last year- with the firm asking for offers over £825,000
But now she has scored a victory after a tax judge described her as an ‘honest, intelligent’ woman who is a super-talented freelancer.
Working for numerous broadcasters, she picks her own work – once even turning down Elton John for an early hours interview that didn’t meet her schedule.
She had created her own ‘persona’ and ‘brand’ and that is what broadcasters wanted when they took her on, said Judge Jennifer Dean.
The dispute hinged on a contract the Scottish star signed with ITV Breakfast in 2012 to present the ‘Daybreak’ and ‘Lorraine’ shows.
In 2016 HM Revenue and Customs presented Lorraine (pictured with her daughter Rosie and husband) with an income tax bill for almost £900,000, plus national insurance contributions of over £300,000
The dispute hinged on a contract the Scottish star signed with ITV Breakfast in 2012 to present Daybreak and Lorraine (pictured, with Kelly interviewing Stacey Solomon in March) shows
She did the deal through her services company, Albatel Limited, but HMRC insisted she in reality became an ITV employee (Lorraine pictured rehearsing her show)
She did the deal through her services company, Albatel Limited, but HMRC insisted she in reality became an ITV employee.
Kelly told Judge Dean she was ‘baffled’ by HMRC’s attitude and denied that tax and national insurance should have been deducted from her income under the PAYE system.
Working for numerous broadcasters, she picks her own work – once even turning down Elton John (seen on February 24) for an early hours interview that didn’t meet her schedule
She said she had been ‘freelance’ since 1992 and had since then worked for the BBC, Channel 4, Scottish TV, Sky and ITV, also writing weekly columns for the Sun newspaper.
She considered it an ‘honour and a responsibility’ that she is one of the handful of TV stars whose names are in the titles of their shows.
She can endorse commercial products however she likes, launching a clothing range for JD Williams, acting as a brand ambassador for Avon and appearing in an online advert for furniture company, Wayfair.
Giving an example of her independence, she said she had refused to interview Elton John on a live link from Australia at 4am as she was filming with the BBC later in the day.
Explaining the ‘give and take’ in her relationship with ITV, she said she had been absent from the broadcaster’s morning schedule for four weeks in 2017 when she went on an expedition to Antarctica
Judge Dean said: ‘Ms Kelly explained she was baffled by HMRC’s reluctance to accept that she is an entertainer….she explained her frustration at the manner in which HMRC had conducted the inquiry.’
Kelly on This Morning in 2004, left, and on talk-show Live Talk with Kaye Adams, Carol McGiffin and Kathryn Apanowicz
Insisting her role was nothing like Jeremy Paxman on Newsnight, Kelly said she ‘dressed up for comedy sketches’ with, amongst others, Aled Jones.
Describing herself as a ‘theatrical artist’, she told the First-tier Tribunal that ‘she acted every day as a version of herself.’
She has he own stylist, her own Twitter account and her presenting work has ranged from the Scottish BAFTAS to the Chelsea flower show.
Kelly also pointed out that she received none of the ‘perks’ available to ITV employees.
She gets no pension from the broadcaster and she’s not obliged to attend think tanks and training ‘away days’ like ITV staffers.
The tribunal was told that Kelly is a ‘unique broadcaster’ and that, for her, ‘ratings are revenue’.
Her ‘Lorraine’ show – described as ‘akin to Oprah’ – ‘has her DNA, she is the show, it could not happen without her and could not exist without her ideas and input.’
When is a person classified as in employment or self-employed?
Last year, regional presenter Christa Ackroyd, 61, was ordered to pay almost £420,000 in unpaid tax after she was ‘encouraged’ to set up a ‘personal service company’.
The broadcaster was the anchor of BBC Look North in Yorkshire for 12 years until inquiries into her tax affairs led to her being taken off air in 2013.
Here we explain when a person is typically classed as a freelancer or an employee…
A person IS typically classed as employed if…
- They have an agreement to provide personal work or services
- They turn up to work even if they do not want to
- There is work for that person as long as the contract or agreement lasts
A person is typically classed as self-employed if…
- They are responsible for the success or failure of their business in regards to profit and loss
- They get to chose the hours they work, when they work and how they work
- If that person can hire or fire workers
- That person is free to work for other companies or take on other work
Upholding Kelly’s appeal, Judge Dean praised her ‘honest and cogent evidence’ and rejected claims that she was ITV’s ‘servant.’
She added: ‘ITV was not employing a ‘servant’, but rather purchasing a product, namely the brand and individual personality of Lorraine Kelly.
She was not entitled to sick pay, holiday pay or other benefits which are generally due to employees.
Overturning the tax bills, the judge concluded: ‘The relationship between Ms Kelly and ITV was a contract for services and not that of employer and employee.’
Judge Dean also ruled that, as a ‘theatrical entertainer’, Kelly was entitled to deduct fees she paid her agent, Roar Global Ltd, from her tax bills.
‘She presents herself as a brand, and that is the brand ITV sought when engaging her,’ the judge said.
‘All parts of the show are a performance, the act being to perform the role of a friendly, chatty and fun personality.
‘Ms Kelly presents a persona of herself…quite simply put, the programmes are entertaining, Ms Kelly is entertaining.
‘She may not like the guest she interviews, she may not like the food she eats, she may not like the film she viewed, but that is where the performance lies, as no doubt with other entertainers such as Ant and Dec or Richard and Judy.
‘We do not doubt that Ms Kelly is an entertaining lady, but the point is that, for the time she is contracted to perform live on air, she is public ‘Lorraine Kelly’.’
Judge Dean said she had ‘no hesitation in concluding that Ms Kelly is a ‘theatrical artist’ and that her agent’s fees were deductible from tax.