by Jason Gorringe, Tax-News.com, London
10 May 2019
The UK tax agency, HM Revenue and Customs, has lost a significant ruling concerning the application of the IR35 intermediaries legislation.
The case concerned the use of a personal services company by Kaye Adams, who
performs services for the state media agency the BBC, as well for other media organizations, on television and on radio, and also writes columns for print media.
So far as the BBC is concerned, during the two tax years of assessment to which
the appeal relates, Adams presented a program on BBC Radio Scotland called
“The Kaye Adams Programme.”
During the two tax years of assessment in question,
Adams provided her services to the BBC pursuant to two agreements.
The dispute concerned whether the income earned under the arrangement should be caught by the IR35 legislation, as HMRC contested. The case centered primarily on whether the BBC exercised control over Adams.
The IR35 legislation is intended to eliminate the tax benefit of situations where a worker works for a client through their own intermediary, often a personal service company (PSC), but would be an employee if they were providing their services directly. As off-payroll workers are paid through their own intermediary, they pay Income Tax and National Insurance contributions (NICs) in a different way to an employee. The rules ensure that an individual who would’ve been an employee, were they providing their services directly, pay broadly the same tax and NICs as an employee.
The First Tier Tribunal in Atholl House Productions Limited v. HMRC ( UKFTT 0242 (TC)) considered the following questions to determine whether she was acting as though she were an employee:
- (a) Does the hypothetical contract involve “mutuality of obligation”?
- (b) Does the hypothetical contract involve sufficient control by the BBC
over Adams to make the BBC Adams’s master? and
- (c) Are the other provisions of the hypothetical contract consistent with
being an employment contract?
HMRC’s argument relied on a number of points, including, it argued, that Adams had no meaningful right of substitution; the BBC had ultimate editorial control over the content of the program; and, that Adams was temporarily suspended, demonstrated that the BBC did
exercise its rights of control from time to time.
Adams argued that, whilst on air she would have ultimate control over which callers to take, what questions to ask and what direction the show should follow, although other members of the team would make suggestions in that regard; over the tax years of assessment in question, she had not
managed to fulfil the Minimum Commitment under at least one of the two
agreements which were pertinent to the appeal and had not been paid a
proportionate part of the Minimum Fee under that agreement as a result; the BBC had never
sought to control the content of her social media output or her articles for
newspapers; and the BBC never sought to place any restrictions on her work for
others and it was at all times understood by the BBC that she would
continue to carry on with her other engagements without seeking the
In fact, it was noted that the BBC would often go out of its way to help
her to fulfill her other engagements by allowing her to present her
program from an alternative location.
In addition, Adams was not entitled to holiday or sick pay or
maternity leave and was not entitled to a pension. In addition, she was not entitled to
apply for other jobs within the BBC in the way that BBC employees could do and was
not subject to certain procedures which applied in relation to employees, such as
formal disciplinary procedures and appraisals.
Ruling for Adams, the Tribunal said: “The overall impression which we have derived from the evidence before
us is that Ms Adams generally carries on her profession as an independent provider of services and not as an employee.”
“Each hypothetical contract also conferred on the BBC a degree of control over
the working output of Ms Adams in relation to the programme. Although the BBC did
not have cause to exercise that control during the term of either actual agreement, it is
clear that its editorial team could have pulled rank on Adams in relation to
editorial matters if matters had ever reached a stage where a disagreement between
Ms Adams and the editorial team as to the content of a particular programme reached
an impasse.” However, it agreed “that position was extremely unlikely to arise.”
“In short, although each hypothetical contract did give the BBC an element of
control over the manner in which Ms Adams performed her services, that control did
not extend to the nature of Ms Adams’s other engagements or, except to the extent
that such content could damage the BBC, the content of such other engagements.”
It therefore concluded that she had acted under a contract for services, rather than an employment contract, and the IR35 rules therefore should not apply.