437: Tax Tribunal rules that IR35 did not apply to BBC presenter working through personal service company

The IR35 off-payroll rules apply if a worker provides services to a client through their own personal service company (PSC) in circumstances where they would have been an employee had they provided services directly to the client. IR35 stops these workers from working as disguised employees by applying income tax and national insurance at employment, not self-employment, rates. The test for determining employment status for tax purposes includes looking at what the terms of the ‘hypothetical’ contract between the individual and the client would be if the PSC was not there, in order to establish whether it would be a contract of employment. This can sometimes be a difficult and finely balanced exercise, as illustrated by the long-running case of Atholl House Productions Ltd v HMRC which concerned a disputed tax and national insurance bill of £124,000.

In an appeal remitted from the Court of Appeal, the First-tier Tax Tribunal has ruled that the IR35 rules did not apply to the TV and radio presenter Kaye Adams, who provided her services to the BBC via her personal service company. The appeal was focused on the issue of whether the terms of the hypothetical contract were consistent with an employment relationship.

The Tribunal noted that that some terms of the hypothetical contract pointed towards employment, including the provision of personal service, the BBC’s obligation to pay a minimum fee, and the BBC’s right of control. In the Tribunal’s view, these factors were more significant than the terms pointing to self-employment which included the parties’ stated intention that an employment relationship did not arise and the absence of customary employment rights. However, the Tribunal concluded that the wider circumstances of Ms Adams’ engagement beyond this hypothetical contract tipped the balance towards self-employment. For example:

• she was engaged for long periods of time on a self-employed basis by many other organisations including ITV, which the BBC did not object to;
• she had not been treated by the BBC as an employee;
• she could be described as a ‘brand’; and
• her engagement was in line with industry custom and practice.

Although the Tribunal concluded that, on balance, the terms of the hypothetical contract and the circumstances in which it arose gave rise to a conclusion that Ms Adams was self-employed, it also acknowledged that this was a finely balanced decision. This outcome may be appealed by HMRC, but the case is a useful reminder of the factors which are relevant to determining employment status for tax. The Tribunal stressed that when assessing the terms of the hypothetical employment contract, it is important to stand back and look at all factors as a whole, and the circumstances at the time when the hypothetical contract would have arisen. It is important to note that the employment status test for tax purposes is not aligned exactly to the test for assessing status for the purposes of employment law.