HMRC loses IR35 appeal in freelance journalist case

HMRC have lost their IR35 appeal against a ruling which found that the journalist and broadcaster, Kay Adams, was not in a ‘disguised’ employment relationship with the BBC when she was providing her services via her personal service company.  

The Upper Tax Tribunal (UTT) in Commissioners for HMRC v Atholl House Productions Limited upheld the original decision that Ms Adams was ‘in business on her account’, meaning she fell outside the IR35 rules. The UTT reached their decision despite concluding that the contract met 2 out of the 3 classic tests of employment status set down in the lead case of Ready Mixed Concrete.  The UTT made the following observations: 

Mutuality of obligation  

The UTT agreed that the requirement for mutuality of obligation was satisfied – the presenter was required to present 160 programmes and was obliged to be paid £155,000 for doing so. 

Control  

The UTT confirmed the focus should be on whether the BBC had the right to control the presenter. It found that the BBC had the right to schedule the programmes as it chose, determine the form and content (though this was rarely exercised) and a qualified right to first call over the presenter’s time (subject to her other engagements), and so this test was satisfied.

Other factors in IR35 appeal 

Despite the above, the UTT found the presenter was not an employee because the agreement did not satisfy the third test in Ready Mixed Concrete – it held that other factors were inconsistent with a “contract of service”. 

In particular, the UTT considered her history as a freelance broadcaster and found there were no relevant differences between the work the presenter carried out for the BBC, and the work she had carried out previously as a self-employed broadcaster. They also noted that HMRC had agreed that in previous tax years, the presenter had fallen outside IR35. 

It also found that the degree of economic dependency the presenter had on the BBC (it accounted for 50 – 70% of her income and a large amount of her time) was not inconsistent with the presenter being in business on her own account – the UTT held she had simply found a stable and substantial revenue stream. It did, however, comment that had the income from her other work diminished, the economic dependency would have pointed more towards employment. 

Key lessons  

The case turned on the impact of the other factors – the UTT noted had it simply relied on mutuality of obligation and control, the presenter would have been classed as an employee and therefore inside IR35. It is therefore crucial that all aspects of a contractor’s relationship with an end-user client are considered when determining whether they are inside or outside IR35. 

It also highlights the need for Status Determination Statements (SDS) to be completed by people who are very familiar with the relationship between the contractor and its client. This is both to comply with the duty to take ‘all reasonable care‘ when drafting an SDS, but also to give the client the best chance of the correct result and avoid challenges by contractors 

If you would like further assistance on the many challenging issues around IR35, ?please contact our employment lawyers.