Tribunal confirms TV presenter  not subject to IR35 rules

In Basic Broadcasting Ltd v HMRC [2022] UKFTT 48 (TC) the First-tier Tribunal (FTT), held that hypothetical contracts between the BBC/ITV and a personal service company (PSC) were contracts for services and not employment contracts, despite a sufficient framework of control and mutuality of obligation being established, and accordingly the presenter was not subject to the off-payroll working rules (IR35).

Background

Basic Broadcasting Ltd (BBL) was the PSC of TV presenter, Adrian Chiles. Between 2012 and 2017, BBL provided Mr Chiles' services to the BBC and ITV, pursuant to two ITV contracts and three BBC contracts.

HMRC issued determinations and decisions to BBL in relation to the work carried out by Mr Chiles on the basis of the "intermediaries legislation", commonly known as IR35 (sections 48-61, Income Tax (Earnings and Pensions) Act 2003  and the equivalent provisions in the Social Securities Contributions (Intermediaries) Regulations 2000). 

The aim of the intermediaries legislation is to ensure that individuals who complete work through their PSC pay employment taxes similar to those they would pay if they were employed by the person for whom they are carrying out work. 

HMRC made its determinations and decisions on the grounds that the hypothetical contracts between Mr Chiles and ITV/the BBC would have been contracts of service (i.e. employment) rather than contracts for services (i.e. self-employment). 

BBL was of the view that Mr Chiles was a self-employed contractor and it had no further liability. It appealed to the FTT.

Under the test in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1ALL ER 433, once a hypothetical contract is constructed, personal service (including mutuality of obligation), control and finally a holistic approach (whether the other provisions of the contract are consistent with a contract of employment), must be considered in determining whether the intermediaries legislation applies.

FTT decision

The appeal was allowed.

In constructing a hypothetical contract with terms reflecting the working relationship Mr Chiles had with ITV and the BBC, the FTT found that in both instances, there was a mutual obligation for work to be provided and undertaken. ITV had offered all the work as anticipated, and as a football match presenter Mr Chiles was required to follow strict editorial guidelines.

As both ITV and the BBC had final editorial control over the production work (to ensure standards were complied with) this was enough for the FTT to find there was a prima facie case that Mr Chiles was controlled as an employee of each organisation. However, the FTT concluded that its prima facie conclusion should be displaced as, had it not been for his PSC, Mr Chiles would have been in business "on his own account". Accordingly, there was no relationship of employment.

In considering the wider context of the contracts, and the surrounding circumstances as a whole, the FTT noted that Mr Chiles had many clients (generating over £350,000 from 25 additional clients), worked under the ITV and BBC contracts at the same time (which were not full-time contracts), completed a wide range of work (including writing for several national news papers, featuring in commercials and presenting roles) and completed unpaid activities to develop his profile. Additionally, he used a management company (costing 15% of his fees) to promote and manage his career. Mr Chiles used his own tools (his home office) and was not integrated into ITV or the BBC. He also sought out work and co-produced his own show. The ITV and BBC contracts throughout the relevant period were part of his business as a whole and not part of an employment contract.

Despite the contracts representing 75% of Mr Chiles' income, the significance of their length (up to three years, and extendable to four years in one case), was offset by Mr Chiles' commitment to spend less than half of his working time performing each. The FTT therefore concluded that Mr Chiles should not be taxed as a direct deemed employee under the intermediaries legislation.

Comment

The intermediaries legislation has proved an area of legal uncertainty in recent years, with a number of cases reaching the FTT. Whilst this case was heavily fact-dependent, the decision is a timely reminder of the importance of the third 'negative' condition of the Ready Mixed Concrete test, which will be welcomed by taxpayers, especially at a time when HMRC appear to attach great weight to the first two 'positive' conditions. 

It is to be hoped that the Court of Appeal will provide some much needed guidance in this important area when it delivers its much anticipated judgment in the Atholl House Productions Ltd case.

The decision can be viewed here.