The First-tier Tax Tribunal recently released a decision on the application of the IR35 legislation to payments made by Manchester United Football Club (MUFC) to Bryan Robson Limited, the personal service company (the PSC) of Bryan Robson (the former long-serving MUFC football player and England captain).

The IR35, or “off-payroll working”, rules apply where a worker who provides services to a client through their own intermediary (often a PSC) would have been considered an employee if they had been providing their services directly to that client. If the rules apply, the worker (in this case, Mr Robson) will be deemed as an employee of the client (in this case, MUFC) and will be subject to PAYE and NICs on his earnings.

In this case, Mr Robson’s PSC entered into an “Ambassador Agreement” with MUFC which, notably, included a licence for MUFC to exploit Mr Robson’s “image rights” and required Mr Robson to make a certain number of personal appearances per year at MUFC’s request, in consideration for a six-monthly fixed sum.

The parties disagreed on how much of the consideration paid under the Ambassador Agreement fell to be taxed under the IR35 legislation. This gave rise to the two following issues. 

1. The “Image Rights” Issue – this involved a consideration of whether any of the fee paid under the agreement fell outside the ambit of the IR35 legislation because it was attributable to an agreement to exploit Mr Robson’s image rights, and not an obligation on the part of Mr Robson personally to perform services for MUFC. HMRC argued that the provisions relating to image rights did not exclude any of the consideration under the agreement from falling within IR35. The FTT acknowledged that, whilst the tribunals have considered image rights in other contexts, this is the first case ever to raise image rights in the context of the IR35 legislation, and the first time a taxpayer has argued that part of the contract between a client and an intermediary related to intellectual property rights rather than the performance of services.
2. The “Employment” Issue – this involved an analysis of whether Mr Robson’s obligations personally to perform services for MUFC under the Ambassador Agreement amounted to a contract of employment between Mr Robson and MUFC. If so, then the arrangements would fall within the scope of the IR35 legislation, and consideration paid under the agreement attributable to those services would be subject to PAYE and NICs. This is now a well-trodden area of law, and one where the assessment is a highly fact sensitive one.

The Image Rights Issue

The Tribunal considered that this case was somewhat unusual in that particular significance had been attached to Mr Robson’s image rights by both the PSC and MUFC. Other cases relating to the IR35 legislation have focused on the services the worker was contracted to perform. Even if there were a provision to the effect that ownership of the intellectual property which arose from those services (such as photos taken at an event) would vest in the client, this was typically an adjunct to the personal performance of the services in question.

In contrast, the Tribunal viewed the licence of the image rights in this case to be central to the contract between the PSC and the client. The Tribunal cited the references to the licence of the image rights in the recitals to the Ambassador Agreement and the detailed provisions covering the licence in the operative parts of the agreement. This was the case notwithstanding the fact that the Ambassador Agreement made no apportionment in the fixed fee paid to the PSC for Mr Robson’s image rights, and for the performance of Mr Robson’s services. The evidence showed that no valuation of Mr Robson’s image rights had ever been carried out, and the parties had never discussed the value of the image rights.

HMRC argued that the recent Upper Tribunal case of Barnes¹ and the First-tier case of PD & MJ Limited² both concerned contracts with PSCs which contained provisions relating to intellectual property and image rights. There had been no suggestion in those cases that any of the consideration should fall outside of the IR35 legislation.

However, relying on the (non-binding) decisions in the cases of Sports Club³ and Hull City⁴, the Tribunal agreed with Mr Robson that consideration which can properly be said to have been paid for a licence of image rights as opposed to the personal performance of services is not subject to tax as employment income.

The Tribunal found that, on the facts of this case, Mr Robson’s image rights had considerable value to MUFC, MUFC had a genuine interest in exploiting those rights and, importantly, MUFC did in fact exploit those rights.

As a result, it was necessary to carry out an apportionment between consideration properly attributable to the licence of Mr Robson’s image rights and consideration properly attributable to his obligation to perform services. The PSC’s appeal against HMRC’s determinations was part-allowed on that basis.

It is yet to be seen whether HMRC will appeal this decision to the Upper Tribunal. The tax treatment of image rights has been a focus for HMRC for some time and HMRC’s position has typically boiled down to the argument that there is no such thing as an “image right”, any arrangements are purely contractual and they are frequently used as a way to disguise payments for services. 

If the decision stands, it would seem a difficult apportionment exercise to carry out, particularly given the evidence that no valuation or discussion of the value of the image rights took place at the relevant time. Without expressing a final view, the FTT cited a few obligations under the Ambassador Agreement that may arguably be considered as attributable to the licencing of image rights (rather than the performance of services), namely, limitations on Mr Robson’s ability to promote a sponsor’s competitor, provisions relating to Mr Robson’s general conduct, and even his willingness to have his photo taken at events. If that approach is correct, then the proportion of Mr Robson’s earnings that relate to “image rights”, and therefore fall outside of IR35, could be significant. 

The Employment Issue

The Tribunal went on to consider the relevant test for the applicability of the IR35 legislation on the remainder of the obligations under the Ambassador Agreement. That is, whether, had the services been performed by Mr Robson pursuant to a contract directly between him and MUFC, he would properly have been regarded as an independent contractor or as an employee.

This requires an assessment of the terms of the hypothetical contract between Mr Robson and MUFC, and whether those terms would amount to a relationship of employment. In assessing employment status, it is necessary to consider: (i) whether there is a mutuality of obligation between the worker and the client; (ii) whether the client exercises a degree of control over the worker; and (iii) whether the terms of the contract are consistent with it being a contract of service.

This will necessarily require a careful consideration of the fact pattern in each case but, here, it was found that factors such as MUFC’s obligation to pay a fixed fee in return for Mr Robson’s obligation to satisfy his minimum commitment of appearances, MUFC’s control over the location, timing and form of Mr Robson’s personal appearances, and the fact that Mr Robson’s services could be considered “part and parcel” (and not simply accessory) to the business of MUFC weighed in favour of Mr Robson being considered an employee for IR35 purposes. Even the fact that his image rights had been licensed to MUFC suggested that he had an employee relationship with the club, as he gave up the ability to exploit those rights for the purposes of his own business in general.

Ultimately, the balancing of factors to determine whether or not Mr Robson should be considered an employee of MUFC follows the long line of guidance which has emerged in the case law featuring a number of familiar names in recent years. Freelancers should take care to ensure that their contracts, and circumstances, are consistent with a self-employment status if that is their intention.

¹The Commissioners for His Majesty’s Revenue and Customs v S & L Barnes Limited [2024] UKUT 262 (TCC)

² PD & MJ Limited v The Commissioners for His Majesty’s Revenue and Customs [2024] UKFTT 0038 (TC)

³ Sports Club plc v Inspector of Taxes [2000] STC (SCD) 443

⁴ Hull City AFC (Tigers) Limited v The Commissioners for Her Majesty’s Revenue and Customs [2019] UKFTT 227 (TC)