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Markel Tax

31 May 2019

Kaye Adams “loosely” avoids IR35

Presenter Kaye Adams has won her high-profile IR35 battle against HMRC, amounting to over £100,000 in potential liability.  HMRC had brought the tax charges for the period between March 2015 and March 2017, during which Adams presented the BBC’s ‘The Kaye Adams Show’ via her limited company Atholl House Productions Limited (AHP).
In the course of the proceedings, the Tribunal found as fact:
  • There was no true right of substitution (somewhat unsurprisingly considering it was called “The Kaye Adams Programme”)
  • Mutual obligations existed between the parties since she was obliged to complete a minimum number of hours but, if she didn’t she would still be paid.
  • The BBC implemented a “light touch” when it came to exercising editorial control, suggesting only a minor level of interference. Nevertheless, it appears the right of control was there, regardless of whether the BBC decided to exercise it or not.
Following the case law precedent established in Ready Mixed Concrete, it may be inconceivable to see how the Tribunal concluded the engagement not to be caught by the IR35 Legislation.
Taking the “Lorimer” approach:
In reaching their decision, the Tribunal considered the traditional fundamentals of Status, however, they decided favoured the “Lorimer” approach.  While this is not an incorrect approach, it begs the question as to whether it was the right one considering the circumstances.
The “Lorimer” approach was first established in Hall v Lorimer, where Mr Lorimer took on a number of engagements that didn’t exceed 10 days at a time. Due to the variety and short duration of engagements, as well as the level of financial risk Lorimer faced, this was considered sufficient evidence of genuine self-employment.
The longevity of AHP’s engagements, along with the lack of financial risk and the number of client’s, suggests AHP was an unlikely candidate for the Lorimer approach.  Therefore, it is surprising that the Tribunal decided to take this approach.
Comparing the facts with the Christa Ackroyd case:
The Tribunal went to great lengths to distinguish this case from the Christa Ackroyd Media Limited (CAM) case, even though the facts of each case do not appear to be significantly different.
The BBC contract had first call on both presenters’ services, meaning the BBC could require presenters to attend training sessions, the BBC retained editorial control and over 50% of the presenters’ income in a given tax year was from the BBC.
So, how did the Tribunals in each case come to two completely different conclusions?    
The written contract stated BBC’s approval must be obtained before taking on engagements elsewhere and training sessions must be attended if the BBC requests it. In the CAM case, the Tribunal applied these contractual terms. Whereas, in the AHP case, the Tribunal held that the hypothetical contract did not represent the written terms, as Adams often took on other engagements, sometimes without informing BBC who did not dispute this. The Tribunal established that this provided an insight into the way BBC viewed the professional relationship.
Another significant difference in both cases was that although it was not possible to control the presenter while they were on air, had the BBC been unhappy with AHP, they would have been able to terminate the agreement. Whereas, for CAM, the Tribunal concluded that the BBC could in fact direct the work.
Unlike Christa Ackroyd, it was determined Kaye Adams was not integrated into the BBC and AHP was considered an external service provider. Conversely, Christa Ackroyd was the public face of BBC North, which could be seen in their BBC to non-BBC payment ratio and the length of contracts. Around 50% of AHP’s income was related to the BBC and the contract was for one year, however, over 95% of CAM’s was received from the BBC and the contract was seven years long.
Additionally, we could also infer from the comments in the judgement that the testimonies were pivotal in how each presenter regarded the situation and how the Tribunal could have perceived each witness. For example, the Tribunal for CAM commented that despite not deliberately avoiding questions, Christa Ackroyd presented her case “in the best light”, but, in contrast, Kaye Adams was deemed to be a credible witness.
Conclusion:
The Tribunal found that AHP was in business on its own account and the hypothetical contract between the parties was a contract for services. Taking a step back, the relationship was at arm’s length and AHP’s position was simply that of an independent business taking on engagements to enhance its own public profile.
What can we learn from this case?
The main lesson is how unpredictable Tribunals can be -it is not a matter of blindly following a “tick list” of factors. It highlights the Tribunals’ propensity for looking at the whole picture of a PSC when considering the application of IR35. It highlights that the Tribunals will consider the secondary factors with weight if they are not convinced the fundamentals of status present a clear picture of the relationship.  The judge stated:
“…the answer in cases such as the present one should not involve the slavish application of a checklist but should instead involve a consideration of the overall picture which emerges from the accumulated detail”
This also suggests a change in the court’s approach - perhaps something of a boost for HMRC who have been pushing this line of attack over Ready Mixed Concrete tests for years. Although on this occasion, it did not work in their favour.
Overall, using this approach is a curious turn for Tribunals and, in our opinion, this judgement is isolated on its facts and is unlikely to carry much weight for future decisions in respect of IR35. We would not be surprised if HMRC appeal this decision, citing the Tribunal erred in law.
If you have any clients in a similar situation, or would like any further advice, please contact us on 03450660035.
Tagged IR35
Next article in series

31 May 2019

NCL Investments Case Study: Were the share options deductible?