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Markel Tax

19 Apr 2021

What can we learn from Kaye Adams’ IR35 victory?

Although it came as no surprise that HMRC appealed the First Tier Tribunal Decision in Atholl House, we were pleased to see that HMRC did not succeed.

Kaye Adams provided services to the BBC via her personal service company, Atholl House Productions Limited (AHP) where she presented the Kaye Adams Show.

In 2019, it was concluded by the First Tier Tribunal (“FTT”) that AHPs engagement with the BBC did not fall within the scope of IR35, even though the following facts were established:

  • A genuine right of substitution did not exist.

  • There was sufficient mutuality of obligations to satisfy the first heading identified in Ready Mix Concrete.

  • The BBC exercised a “light touch” in respect of editorial control which in turn demonstrated that the right of control clearly existed, irrespective as to whether the BBC exercised it or not.  

It was concluded by the FTT that one should not apply a checklist but give “consideration of the overall picture which emerges from the accumulated detail”.  Accordingly, significant weight was placed on the fact Kaye Adams had been a freelance journalist for 20 years, was not dependant exclusively on the BBC and was simply carrying on her profession as an independent provider of services.  Unsurprisingly, HMRC appealed this decision, focussing mainly on the argument that the FTT rendered a “perverse judgement”.

While the Upper Tier Tribunal (UTT) did find favour with HMRC’s submission that the FTT did not follow the correct approach, nevertheless the UTT held that HMRC’s overall appeal should be dismissed, and once more found in favour of Kaye Adams.

The Upper Tier Tribunal (”UTT”) went to great lengths to explain what should be considered when forming a hypothetical contract and drew a clear distinction from the Autoclenz decision to conclude that while the FTT erred in its approach on the application of Autoclenz, written contracts must always be given significant weight. While the UTT accepted the BBC contract was a standard contract, it concluded that how the parties conducted themselves may ultimately include additional terms and conditions that need to be considered.

Substantial emphasis was also placed on the third test of ‘Ready Mix Concrete’ 1968 by the UT and as such they agreed with the FTT’s conclusion that Kaye Adams was clearly no way financially reliant on the BBC and accordingly, AHP was in fact in business on its own account and as such the hypothetical contract between the parties was a contract for services.

So what can we learn from this case?

If anything, we can learn that contracts are still KEY and form the basis of any decision - they cannot simply be set aside.  At Markel Tax, we advise that contracts are carefully reviewed to ensure they accurately reflect the working practices, and indeed this case would have benefitted from clearer, robust, contracts which mirrored what happens in practice.

This case also firmly places the three tests laid out in ‘Ready Mixed Concrete’ 1968 at the forefront of any determination. The Tribunal were clear that these tests remain the fundamental precedent for determining IR35.

While the commentary of this case provides a refreshing reminder of what must be considered for IR35, the case itself may be of limited applicability to the typical contractual arrangements outside of the broadcasting industry. We would certainly not advise any company to place sole reliance on in business factors.

Speak to our team today

We have been advising and defending clients against IR35 challenges since the introduction of the legislation 20 years ago. We offer a complete package of due diligence services to ensure you are well prepared and protected.

Markel Tax’s FeePayer Protect insurance is specifically designed to defend against an HMRC enquiry and even the potential tax losses where you are also the fee payer. What’s more, we are able to provide you with contract reviews including the whole supply chain from end-client through agency to the contractor, support in drafting an SDS, as well as training and on-going support from our tax experts.

Speak to our team today to find out how we can help you protect yourself against IR35 risks. Call 0333 920 1589 or request a call-back.

Tagged IR35 Construction
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What can a contractor do if they don't receive a status determination statement?