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HMRC win IR35 appeal

Newsletter issue - March 2018.

HMRC have won a significant appeal concerning the application of employment intermediaries legislation to BBC television presenters. In Christa Ackroyd Media Ltd and the Commissioners for Her Majesty's Revenue and Customs, [2018] UKFTT 0069 TC06334, the First Tier Tribunal (FTT) ruled that the legislation (known as the 'IR35 rules') applied to the arrangements under which the BBC contracted one of the presenters of the regional news programme Look North.

Christa Ackroyd, whose 'personal service company' (Christa Ackroyd Media Ltd (CAM)), was engaged under a seven year contract with the BBC to provide her services on up to 225 days per year. Ackroyd was appealing against demands for some £419,151 from HMRC relating to income tax and National Insurance contributions (NICs) for the tax years 2006/07 to 2012/13.

This appeal is specifically concerned with 'hypothetical contract'. HMRC argued that such a contract between the BBC and Ackroyd would have been a 'contract of service' rather than a 'contract for services', that her status was that of an employee, and that CAM Ltd should therefore account for tax and NICs accordingly. The taxpayer however, contended that she was a self-employed contractor, and there was no further liability on the part of CAM Ltd.

The FTT found that the hypothetical contract would have been a contract of employment. Such factors as:

• mutuality of obligation;
• control of what, when, where and how the taxpayer performed her role;
• right of substitution; and
• whether the taxpayer was in business on her own account,

were all considered in depth.

In his ruling, the judge said that a hypothetical contract of seven years, for at least 225 days per year, and terminable only for a material breach, pointed towards a contract of employment. In particular, the length of the contract was 'pursuant to a highly stable, regular and continuous arrangement'. It involved a high degree of continuity rather than a succession of short term engagements. However, he also went on to say (at para. 171): ‘We do not consider that the fact the fees were payable on a monthly basis akin to the way an employee might be paid is significant. Nor is the absence of any provision for holiday, sick pay or pension entitlement.'

In this case, it was the ability of the BBC to 'control' the taxpayer, and the fact that there was a seven year contract for what was effectively a full time job, that were the significant factors in the Tribunal's findings that the taxpayer was an employee under a hypothetical contract.

The FTT said that whilst this appeal is one of a number of other appeals involving television presenters and PSCs, it is not a lead case as such. It is a significant ruling though as, not least, it indicates that the IR35 can be enforced where HMRC see fit to do so.