Atholl House Productions: BBC Presenter wins IR35 case

In HMRC v Atholl House Productions Ltd [2021] UKUT 0037 (TCC), the Upper Tribunal (UT) has held that IR35 did not apply to a presenter who provided services to the BBC through a personal service company.

Background

Atholl House Productions Ltd (AHP) is the personal services company of the journalist and broadcaster Kaye Adams. HMRC had opened an inquiry into AHP's affairs, and specifically examined the contracts it had with BBC Radio Scotland in the 2015/16 and 2016/17 tax years. Under the terms of the contracts, AHP would provide Ms Adams' services as a radio presenter in return for payment. 

HMRC concluded that this arrangement was such that Ms Adams should be treated as an employee of the BBC and within the scope of the intermediaries legislation in Chapter 8, Part 8, Income Tax (Earnings and Pensions) Act 2003 (ITEPA), commonly known as IR35. Accordingly, payments to AHP for Ms Adams' services were to be treated as employment income and AHP was obliged to account for tax under the PAYE system and to pay national insurance contributions.  AHP appealed HMRC's decision to the First-tier Tribunal (FTT).

FTT decision

The appeal was allowed.

The question to be determined by the FTT was whether the contracts, had they been made between the BBC and Ms Adams, would have been contracts of service and thus within IR35.

The FTT considered whether Ms Adams had employee status in accordance with the test laid down in Ready Mixed Concrete Ltd v Minister of Pensions [1968] 2 QB 497. This consisted of three main factors: 

(1)  whether there was mutuality of obligations between the parties; 

(2)  whether the BBC had control over Ms Adams; and 

(3)  if the above were satisfied, were there any other factors to displace the prima facie conclusion that Ms Adams was an employee.

The FTT decided that:

(i) There was mutuality of obligations as the BBC had to provide a minimum fee to Ms Adams even if she did not provide a broadcasting service. If she could not provide services then the BBC had the responsibility of locating another broadcaster. Ms Adams was also expected to provide a personal service as she could not provide a substitute if she was unavailable. 

(ii) As to whether the BBC had control over Ms Adams, the FTT found that although an editorial team had final say over what content was broadcast, in reality, Ms Adams had control over what happened during the broadcast and it was highly unlikely that the BBC's editors would ever exercise significant control over the show. Although the written contracts claimed the BBC had exclusive rights to use Ms Adams' services, in reality, it did not have control over any other contracts Ms Adams chose to enter into with other media organisations and she was free to enter into agreements with other organisations. 

(iii) The contracts were in standard form drafted by the BBC, suggesting they were intended to be heavily modified. It was also noted that Ms Adams did not receive any holiday or sick pay.

The FTT concluded that although the written contracts did not reflect the true arrangement between the parties, there was a 'hypothetical contract' which comprised the real terms between AHP, Ms Adams and the BBC. This hypothetical contract was a contract for services and did not reflect an employment relationship. Accordingly, IR35 did not apply. 

HMRC appealed to the UT.

UT decision

The appeal was dismissed.

HMRC argued that:

(i) the hypothetical contract did not set out the true arrangement between AHP and the BBC as the latter did have contractual rights in relation to Ms Adams' other engagements and had a right of first call on her services; and

(ii) the FTT had not taken into account relevant factors in determining whether Ms Adams was carrying on 'business on her own account'.

With regard to ground (i), the UT considered that the FTT gave considerable weight to factors which would not normally justify the conclusion that a hypothetical contract was in place. Even if the written contracts were in a standard form which would in practice often subsequently include additional terms tailored to the particular party contracting with the BBC, the FTT was wrong to start with the assumption that the written contracts had to have been totally modified. In addition, the FTT was not justified in departing from the normal principles of contractual interpretation set out in Autoclenz Ltd v Belcher [2011] UKSC 41.

However, the UT found that the FTT had correctly concluded that the terms of the hypothetical contract were not consistent with the written agreements. It was likely that the BBC would have been flexible if Ms Adams had wanted to pursue other commitments. 

The UT reached the same conclusion as the FTT that the contract was not one of employment.

With regard to ground (ii), the UT decided it would be possible for Ms Adams to carry on business on her own account even if the BBC was her material income source, as otherwise many independent contractors would be considered employees. Ms Adams' economic dependence had to be considered in the context of her career overall and not restricted to the tax years under enquiry.

Comment

One of the most interesting aspects of this decision is the UT's consideration of what is involved in 'being in business on your own account'. The UT re-affirmed that this requires a 'rigorous' rather than an 'impressionistic' assessment. In the view of the UT, Ms Adams had been working as a freelancer in previous years and the fact that most of her income derived from the BBC contract in the particular tax years under enquiry did not negate this. Although agreeing with HMRC on many points, it concluded that Ms Adams could only have been self-employed.

Employment status disputes will of course turn on their own particular facts, but the UT’s detailed analysis of the relationship between the actual contract between AHP and the BBC and the hypothetical contract between the BBC and Ms Adams is worthy of careful consideration by anyone dealing with employment status disputes. Such disputes are likely to take on a greater significance given the extension of the public sector off-payroll rules to the private sector from 6 April 2021.

The decision can be viewed here.