Archive for month: June, 2019

 

Introduction

The IR35 legislation has always been controversial, and a new decision of the First-Tier Tax Tribunal (“FTT”),  Atholl House Productions Limited v HMRC TC/2018/02263, (“Atholl”), has shed light on this important area.  The case concerned Kaye Adams, broadcaster and journalist, who successfully appealed a challenge to her self-employed status under the IR35 rules. This covered an engagement with the BBC as presenter of ‘The Kaye Adams Programme’ during the 2015/16 and 2016/17 tax years.

 

The facts

The decision of the FTT related to an appeal by the Appellant against:

(a)    determinations of 24 October 2017 in respect of income tax payable by way of PAYE  under the Income Tax (PAYE) Regulations 2003 (2003/2682) (the PAYE Regulations) (the Determinations); and

(b)   a decision notice of the same date in respect of Class 1 National Insurance Contributions payable under Section 8 of the Social Security Contributions (Transfer of Functions etc) Act 1999.

 

Each of the Determinations and the Notice were made on the basis that the intermediaries legislation in Sections 48 to 61 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), and the related provisions of the Social Security Contributions (Intermediaries) Regulations 2000 (the 2000 Regulations), commonly known for short as IR35, applied to the arrangements entered into between the Appellant and the British Broadcasting Corporation (the BBC) in relation to the provision by the Appellant to the BBC of the services of Ms Kaye Adams.

 

The key issue was whether, if the services supplied by Ms Adams to the BBC had been supplied under a contract directly between Ms Adams and the BBC, Ms Adams would have been regarded for income tax purposes as an employee of the BBC.

 

Witness evidence

Ms Adams gave evidence as follows:

• she had been a freelance journalist for more than 20 years and had provided her services to a wide variety of media organisations, including the BBC. Over this long period, she had never received from any organisation to whom she provided her services any employment-related benefits such as holiday and sick pay, maternity leave or a pension entitlement;
• she was first approached by Mr Jeff Zycinski, the head of radio at BBC Scotland, in 2010 to host a morning radio phone-in and she had worked for the BBC since that date although the number of weekly programmes and the duration of those programmes have fluctuated over that period and she has provided her services under a series of agreements, each of which has a term of around one year;
• if she was unable to fulfil the Minimum Commitment (160 programmes) because of her own unavailability, then the Minimum Fee would be reduced by a pro rata amount.
• whilst on air, she would have ultimate control over which callers to take, what questions to ask and what direction the show should follow although other members of the team would make suggestions in that regard;
• as a result of her parents’ ill-health and her responsibilities to her children over the tax years of assessment in question, she had not managed to fulfil the Minimum Commitment under at least one of the two agreements which were pertinent to the appeal and had not been paid a proportionate part of the Minimum Fee under that agreement as a result;
• none of the agreements which were pertinent to the appeal had been reviewed by her agent because she saw no need to pay an agency commission in respect of them, given that her earlier agreements with the BBC had been negotiated by her agent;
• during the term of one of those earlier agreements (in 2011), she had put out a tweet from her own personal twitter account in relation to the then London Mayor, Boris Johnson. The BBC considered that the tweet was in breach of the Standards and she was suspended for 3 weeks as a result.  The BBC did not pay her for the programmes which she had missed during the period of her suspension;
• she was very conscious of the need to maintain a high personal profile in order to maximise her income. Accordingly, she had spent a lot of time developing her own brand through her work for other media outlets, her hosting of events and awards and her social media output;
• the BBC never sought to place any restrictions on her work for others and it was at all times understood by the BBC that she would continue to carry on with her other engagements without seeking the BBC’s permission;
• she did not have access to the BBC operating system when she was working from home and would therefore use her own mobile phone, computer and personal email address to communicate with the BBC during those times;
• she had been given a copy of the Guidelines when she first started to work for the BBC but she couldn’t say that she had ever read them or referred to them on any occasion;
• apart from one occasion when she had been suspended, the BBC had never sought to control the content of her social media output or her articles for newspapers;
• she had not read the written agreements in issue as she had worked for the BBC for a number of years already.

 

The FTT decision

The FTT supported Ms Adam. The Tribunal said:

 

‘In my judgment the true position, consistent with Tanton, Kalwak and Szilagyi (the relevant case law) is that where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were. Evidence of how the parties conducted themselves in practice may be so persuasive that the tribunal can draw an inference that that practice reflects the true obligations of the parties. But the mere fact that the parties conducted themselves in a particular way does not of itself mean that that conduct accurately reflects the legal rights and obligations………..It follows that to say that the term of any written agreement must necessarily be regarded as being a term of the actual agreement unless it is a sham or is contemplating an unrealistic possibility is too restrictive an approach. It involves giving too much force to the terms of the written agreement at the expense of other evidence which may be compelling in demonstrating that the actual agreement between the parties did not in fact contain that term.

…….. We found both Ms Adams and Mr Paterson (an employee of the BBC who was editor in charge of the Kaye Adams Programme between April 2015 and December 2016)  to be very credible witnesses and we have accordingly concluded, on balance, that, notwithstanding the terms of each written agreement……the relevant written agreement did not reflect the terms of the actual agreement between the BBC and the Appellant which the relevant written agreement purportedly recorded.

We therefore find as a fact that those terms in each written agreement which stipulated that the BBC had ultimate editorial control over the content of the programme were also terms in each actual agreement between the BBC and the Appellant……

The findings of fact set out in paragraphs 82 to 101 above mean that, in our view, the following were the material terms of each actual agreement between the BBC and the Appellant:

(a)          during the term of the relevant agreement, the BBC did not have first call on Ms Adams’ time and Ms Adams did not need to obtain the BBC’s permission before accepting any other engagements;

(b)           the BBC could not control the content of Ms Adams’ other engagements (although the BBC could sanction Ms Adams retrospectively if it considered that that content brought the BBC into disrepute or could result in the BBC’s suffering OFCOM sanctions);

(c)           Ms Adams had no right of substitution but had instead to perform the relevant services herself;

(d)         the BBC had ultimate editorial control over the content of the programmes;

(e)          the BBC would be obliged to pay the Minimum Fee in circumstances where Ms Adams failed to achieve the Minimum Commitment because the BBC did not call on her to present a programme which she was willing and able to present;

(f)           the Minimum Fee would be reduced pro rata in circumstances where Ms Adams failed to achieve the Minimum Commitment because she was unwilling or unable to present a programme;

(g)          all intellectual property in relation to the programme content belonged to the BBC and Ms Adams waived all of her moral rights to such content;

(h)          Ms Adams was required to attend editorial training and to undergo a full medical, in each case should the BBC so request;

(i)         Ms Adams was responsible for providing her own clothing;

(j)         Ms Adams was not entitled to holiday or sick pay, maternity leave or any pension entitlement; and

(k)          Ms Adams was not entitled or obliged to receive a review, was not subject to the formal procedures applicable to BBC employees when a change was made to the nature of their work obligations and was not entitled to apply as an insider for internal vacancies.

 

……… Thus, the overall impression which we have derived from the evidence before us is that Ms Adams generally carries on her profession as an independent provider of services and not as an employee……….. In short, although each hypothetical contract did give the BBC an element of control over the manner in which Ms Adams performed her services, that control did not extend to the nature of Ms Adams’ other engagements or, except to the extent that such content could damage the BBC, the content of such other engagements.’

 

Conclusion

It is difficult for taxpayers to win complex tax cases at the Tribunal these days and it is heartening that one such has succeeded.  However, the Adams case will not doubt be appealed by HMRC so the story will continue.  The major lesson to take from the case is that each case is fact specific and will turn on the impression given by the witness in question.  In this case, Ms Adams appears to have done herself credit.