1 November 2019
Last year Christa Ackroyd, in the form of her personal service company Christa Ackroyd Media Limited (CAM), lost a First Tier Tribunal (FTT) appeal, with the decision going HMRC’s way that IR35 did apply to her work with the BBC on Look North. With more than £400k in tax riding on the decision, unsurprisingly CAM appealed to the Upper Tier Tribunal (UTT).
As is usual in IR35 cases, once the evidence has been winnowed, there’s usually a good deal of case law to go at, some of it seemingly contradictory. Typically, the starting point is the decision in the 1968 Ready Mixed Concrete case. This lays down a number of markers for a contract of service, i.e. employment. In the FTT hearing, there was agreement from the protagonists on most aspects, with the existence of control, or its absence, the key point. In line with this, the UTT looked extensively at control.
The finer detail
In assessing employment status cases, it can be necessary to establish a hypothetical contract, which may be based on any existing contract, but will also take into account the context of the relationship and any performance-related factors. In the FTT hearing Christa Ackroyd gave evidence that she had day-to-day editorial control over her work, whereas HMRC contended that the BBC would have the last word on such matters.
The basis of CAM’s appeal was that the terms of the BBC contract are de facto the terms of the hypothetical contract and that the BBC contract contains no ultimate right of control. It is true that the contracts in place in this case were more comprehensive than in many other cases, but the UTT thought context was also important. Indeed, CAM had argued in front of the FTT that factors other than those in the contract should be considered. The context in this case was the BBC Editorial Guidelines. These guidelines didn’t exist when the contract between CAM and the BBC was entered into, but there was an agreement between the BBC and the Government that meant the BBC had to abide by certain programme standards. These gave the context to the contract.
Further, Ready Mixed Concrete established that where something was not explicit within a contract, it was necessary to look further as to what might be implicit in a particular area. Thus the absence of an ultimate right of control within the contract meant that the court had to look elsewhere.
The UTT brought out another important aspect of control in the context of Christa Ackroyd’s assertion that she would have never entered into a contract under which the BBC would control her. The decision notes that it’s not the point that the BBC would control her, but that the BBC could control her.
What was the result?
The appeal was lost and I would imagine that HMRC is feeling quite pleased with itself, having got a positive decision in a fairly high-profile case at a sufficiently high level in the courts to create a precedent. Other TV presenters and reporters are being subject to scrutiny by HMRC and a finding that the editorial guidelines of a broadcaster can give ultimate control to the broadcaster will give HMRC leverage in these cases.
It has long been argued that regulations and guidelines that affect both employed and self-employed workers in a sector do not provide an indicator one way or the other of status. In this case, using the hypothetical contract concept and the absence of an ultimate control tie-breaker in the existing contracts, gave an opportunity for a decision on control to be made.
The future of off-payroll working
It should be noted that the new rules in respect of off-payroll working in the private sector will be introduced from April 2020. Read our specialist blog about this here. Ahead of this, some large companies are making wholesale changes to the way in which they engage with contractors. For those companies that operate within regulated areas, this method of analysis may give some justification for what have been characterised as knee-jerk reactions.
If you have any concerns about an IR35 issue or the upcoming off-payroll working in the private sector rules, contact the UHY tax team or call 020 7216 4600.
Alternatively, fill out our contact form here.