HMRC lose another high-profile IR35 Tribunal Case

Kaye Adams, best known for her work on ‘Loose Women’, is the latest TV presenter to have come under the scrutiny of HMRC.

Despite the wide-ranging work undertaken via her limited company, Atholl House Productions Ltd, HMRC’s sole focus was on the work undertaken with the BBC. The appeal was heard in London on 11 & 12 March this year and concerned two tax years ending 05 April 2016 and 05 April 2017, amounting to £43,291 in tax liabilities.

Kaye Adams’ services are certainly not exclusive to the BBC. In addition to working with the BBC, Adams has worked on “Loose Women” for ITV (as stated above) and also for Sky undertaking a newspaper review, in addition to writing various columns for a variety of newspapers. She has also presented and hosted events and award evenings in the corporate sector.

In considering the evidence, the Tribunal refer to Hall v Lorimer which stresses the importance of conspiring the whole picture;

“In order to determine whether a person carries on business on his own account it is necessary to consider many different aspects of that person’s work activity. This is not a mechanical exercise of running through items on a checklist to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail…,” once again putting into question the usefulness of HMRC’s CEST tool.

IR35 Status

In reaching a decision, the usual key IR35 status tests were considered but interestingly enough, did not seem to be the basis upon which the Tribunal’s decision was made. It was accepted by the Tribunal that there was no genuine right of substitution, there was also an element of control, albeit not to the extent highlighted by the Christa Ackroyd case.

With regard to substitution it was stated that; “…Ms Adams had no meaningful right of substitution. The right of substitution described in clause 16.4 of Part B of each written agreement was so severely circumscribed as to be worthless. In the first place, it was exercisable only in exceptional circumstances and in the second place the warranty…that any substitute would need to be both director of and shareholder in the Appellant in order to qualify as a substitute and the possibility that any potential replacement would have satisfied those tests was remote.”

This is very interesting, as in many contracts we review substitution clauses contain this same warranty to which we would always raise concerns in significantly restricting the right of substitution.

As for control, the written terms of the agreement between the BBC and Atholl House Productions Ltd stated that Ms Adams would “read and fully comply with the Guidelines and would fully comply with “the BBC’s Values” and any other editorial policies and other BBC guidelines and policies as may be advised to the appellant from time to time.”

Similarities with these comments can also be drawn from the Tribunal involving CAM Media Ltd, however unlike the case involving CAM Media (Christa Ackroyd), Kaye Adams was not instructed by the BBC, Ms Adams did not have to seek the permission of the BBC before undertaking work for other clients and did undertake concurrent contracts. Evidence given by M Paterson who was editor in charge of the Kaye Adams Programme stated that she was;

“very much a broadcaster in her own right, given that she works for others, she isn’t “BBC’s Kaye Adams,” she is a journalist who happens to work for us.”

This is rather telling of the BBC’s understanding of the engagement, where they did not expect Kaye Adams to be integrated within the BBC’s organisation. Despite this, it was maintained that the BBC did retain ultimate editorial control over the content of the programme, but it was noted that the BBC could not exert any control over Kaye Adams’ other engagements. Mutuality of obligation was not considered to be a factor which would add much weight to case one way or the other.

Right of Substitution

There was therefore no genuine right of substitution and it appears that the BBC did have a right of control over the work undertaken. However, the Tribunal concluded that Atholl House Productions Ltd were not caught by IR35, and in this decision the Tribunal considered the importance of the tests in the context of the operation of the business as a whole.

The Tribunal considered the fact that the work undertaken for the BBC made up over 50% of Atholl House Production’s income;

“…we do not think that Ms Adams other work can be described as de minimis or insignificant, either in terms of remuneration or in terms of Ms Adams or in terms of Ms Adams overall working time…approximately 30%, on average of Ms Adams gross income over the two tax years of assessment derived from engagements which were not with the BBC and it is therefore apparently that Ms Adams must have spent a meaningful part of her overall working time on those other engagements.”

Additionally, the BBC did not have first call on the services provided by Atholl House Productions Ltd and it was considered by the Tribunal that Kaye Adams was not treated like BBC employees. In summary the Tribunal commented;

“…when one stands back from the detail and considers the whole picture in this case as is suggested by the language of Mummery J in Hall, that picture is one which leads us to conclude that each hypothetical contract between the BBC and Ms Adams was a contract for services and did not give rise to a relationship of employer and employee.”

The Tribunal made reference to the ‘Ackroyd’ case understandably expecting that similarities between the two cases would be drawn. In citing the differences between the cases, it was highlighted that in the Ackroyd case the work with the BBC amounted to over 90% of the aggregate annual income of CAM Ltd. Additionally, the contracts were for a much longer period. Additionally, the BBC had first call on the services provided by Christa Ackroyd who was required to attend training sessions required by the BBC. The BBC also exercised control over the work in telling Christa Ackroyd who she would be interviewing. She was also required to seek the permission of the BBC prior to working for other clients.

Whilst there are undoubtedly some differences between the cases, based on the Tribunal’s decision regarding Kaye Adams, Christa Ackroyd may well use this ruling as an opportunity to appeal the decision made by the Tax Tribunal earlier this year regarding CAM Ltd’s contracts with the BBC – it certainly added weight to her case. What is interesting in this case is that had Kaye Adams completed HMRC’s CEST tool, it most likely would have provided an inside of IR35 opinion whereas the Tribunal have found the reverse to be true.