HMRC have lost their appeal to the Upper Tier Tribunal (UTT) that the IR35 legislation should be applied in the case of the presenter Kaye Adams, who provided her services to the BBC via her personal service company Atholl House Productions Ltd.
Had HMRC been successful in their appeal that IR35 did apply for the 2015-16 and 2016-17 tax years in relation to the contract(s) in place between Ms Adams’s company and the BBC, HMRC would have been looking to pursue the outstanding tax and National Insurance Contributions considered due, totalling nearly £125,000.
It should be noted that HMRC were successful in arguing one of its grounds of appeal regarding the misapplication of the Supreme Court’s decision in the Employment Tribunal case of Autoclenz v Belcher. Ultimately, however, the UTT found that this particular issue bore no relevance as the Autoclenz case involved neither the IR35 legislation nor the creation of a ‘hypothetical contract’ within the meaning of the intermediaries legislation.
The UTT paid particular attention to the correct approach to determine how to distinguish between the actual written contract and how this would work in practice when considering the ‘hypothetical contract’. This re-emphasises the fact that the written contract and the practical working arrangements should align to ensure the correct information is used when determining the employment status.
In considering the three test stages of The Ready-Mix Concrete case (the tax case that is regarded as the cornerstone when establishing whether a contract of service exists), the UTT concluded that there was sufficient mutuality of obligation and sufficient framework of control to satisfy both the first and second tests of Ready-Mix Concrete. Ms Adams was also found to be providing personal service.
This left the third and final test of whether the other provisions of the contract are consistent with it being a contract of service. Both parties agreed that if a person is “in business on their own account”, to quote the phrase used in Hall v Lorimer  1 WLR 209, that may supply a reason why, at the third Ready Mixed Concrete stage, a contract is not one of employment even though it provides for a sufficient framework of mutuality and control.
The principles for determining if an individual is in business on their own account involve a careful consideration of the different aspects of their work activities, and an evaluation of the overall position to establish whether that individual is in business on their own account or working within someone else’s business.
When establishing the nature of Ms Adams’ work, the First Tier Tribunal (FTT), as part of their judgement, focused on other work she undertook on a freelance basis in addition to the contracts she had with the BBC. The UTT were unwilling to accept HMRC’s view that the FTT decision was flawed because they did not have evidence to determine if Ms Adams had been self-employed for over 20 years. It was accepted that she had worked as a freelancer for the majority of her career.
The UTT also agreed with the FTT findings that it is inappropriate to focus solely on the two tax years under assessment but rather these years needed to be considered within the context of her professional career as a whole. This is because the contracts with the BBC did not occur in isolation but formed part of her overall professional career.
The decision from the UTT was that under the hypothetical contracts at issue, Ms Adams would have been in business on her own account and that there was no employer/employee relationship between Ms Adams and the BBC.
This decision reaffirms the need to focus not only on the relationship between the parties but also on the overall picture and whether the individual does or does not demonstrate that they are in business on their own account.
The outcome of this case, whilst encouraging, does emphasise potential issues regarding the up-coming roll out of the off-payroll working rules in the private sector. One issue will be whether end-clients hold sufficient information or are aware of the individual contractor’s other business activities that could impact on the employment status position. This could result in end-clients making status determinations whilst only considering part of the overall picture
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