This month’s Chartered Accountants Tax Case Digest takes a look at a recent First Tier Tribunal (“FTT”) case where another TV personality’s company won its appeal against a tax and national insurance assessment by successfully arguing that IR35 did not apply. This win follows on from an earlier case in which TV personality Lorraine Kelly’s company also won its appeal against an IR35 assessment. To date it is not clear if HMRC plans to appeal either decision.

The decision in this case comes at a time when the IR35 off-payroll working public sector rules are less than a year from implementation in the private sector from April 2020. HMRC recently closed its consultation “Off-payroll working rules from April 2020” which examines these proposals in more detail. The NI Tax Committee’s response to that consultation will feature in next month’s edition of tax.point.

Background

The case concerned an appeal by Atholl House Productions Limited, the Appellants, against determinations made in October 2017 in respect of PAYE and Class 1 national insurance contributions (“NIC”) on the basis that the IR 35 “intermediaries legislation” applied to the arrangements entered into between the Appellant and the BBC in relation to the provision of the services of Ms Kaye Adams.

Each of the determinations related to four tax years of assessment (2013/14–2016/17 inclusive). However HMRC accepted the appeals in respect of 2013/14 and 2014/15 leaving only the latter two appeals in issue between the parties which totalled approximately £125,000 in income tax and NIC.

The Appellant is the personal service company of Ms Kaye Adams, who performs services for the BBC and other media organisations. Ms Adams started her career in the eighties and has been a freelance journalist since the mid-1990s. Her work has included appearances on TV in programmes such as “Loose Women” on ITV and the newspaper review on Sky, together with columns for various newspapers and magazines.

In addition, Ms Adams has worked extensively in the corporate sector, hosting events and awards evenings and giving presentations. Ms Adams also has a significant social media profile and has written two books.

During the two tax years of assessment to which the appeal relates, Ms Adams presented a programme on BBC Radio Scotland called “The Kaye Adams Programme”. The show ran for three hours on each weekday morning with a phone-in for the first hour and items of topical interest thereafter.

Ms Adams provided her services to the BBC pursuant to two agreements between the BBC and the Appellant. At the hearing, the Tribunal was provided with the terms of each written agreement which related to the presentation of 160 programmes during the period specified. Both written agreements were on the same terms.

The question before the Tribunal was whether the relevant IR35 legislation was satisfied in relation to the two tax years of assessment in question namely, whether

“if the services supplied by Ms Adams to the BBC had been supplied under a contract directly between Ms Adams and the BBC, Ms Adams would have been regarded for income tax purposes as an employee of the BBC.”

The case centered primarily on whether the BBC exercised control over Ms Adams.

HMRC argued that Ms Adams had no meaningful right of substitution. The three week suspension of Ms Adams over a tweet in 2011 demonstrated that the BBC did exercise its rights of control from time to time. In addition, the BBC had ultimate editorial control over the content of the program.

Ms 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.

Over the two years assessment in question, Ms Adams also had not managed to fulfil the Minimum Commitment under at least one of the two agreements and thus had not been paid a proportionate part of the Minimum Fee under that agreement as a result.

The BBC 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. In addition, it was at all times understood by the BBC that she would continue to carry on with her other engagements without seeking the BBC’s permission.

It was also noted that the BBC would often accommodate her in fulfilling 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. She also 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.

Decision

The Tribunal considered the following questions in arriving at its decision:

• Does the hypothetical contract involve “mutuality of obligation”?;
• Does the hypothetical contract involve sufficient control by the BBC over Ms Adams to make the BBC Ms Adams’s master?; and
• Are the other provisions of the hypothetical contract consistent with being an employment contract?

Each hypothetical contract 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 was agreed that that position was extremely unlikely to arise.

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.

Though Ms Adams did not in any meaningful sense provide her own equipment in order to carry out her work for the BBC, she did not hire any staff to assist her in work and she ran no financial risk apart from the risk of bad financial debts and of being unable to find work, it was far more meaningful to consider the extent to which she was dependent on one particular paymaster for the financial exploitation of her talents, the length of the relevant engagements, and the number of different clients involved in those engagements.

In considering this, there was some debate between the parties as to the precise percentage which Ms Adams’s work for the BBC over the two tax years of assessment in question bore to Ms Adams’s work overall, both in terms of financial remuneration and in terms of time taken.

It was clear that the percentage in each case was significant – both parties agreed that her remuneration under the two contracts with the BBC amounted to over 50% of her income and, on the days on which she presented the programme, a significant part of her working day would be taken up with the programme. However, the Tribunal did not think that Ms Adams’s other work over that period could be described as being de minimis or insignificant, either in terms of remuneration or in terms of Ms Adams’s overall working time. It was apparent that Ms Adams spent a meaningful part of her overall working time on other engagements.

Thus, the overall impression derived from the evidence was that Ms Adams generally carries on her profession as an independent provider of services and not as an employee. 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.

The full judgment in this case is available from:- http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11052/TC07088.pdf