Date01 Dec 2023
It was announced on 29 November that broadcaster Kaye Adams had won her IR35 case between Atholl House Productions and HMRC.
This is the fourth time that the case was taken to tribunal over a long-running nine-year period. None of the judges ruled in favour of HMRC, thereby confirming Ms Adams’ contract with the BBC is outside of the scope of IR35.
Kaye Adams is a broadcaster/presenter who operates through her own production company, Atholl House Productions Limited. The dispute originally related to services provided to the BBC for the years between 2013 and 2017. The BBC paid Atholl House Productions Limited for this work, without any taxes being deducted at source. HMRC challenged this treatment on the basis the contract was caught by the IR35 (Chapter 8 ITEPA 2003) legislation, giving rise to a liability of £124,000. This amount should have reduced to £70,000 if taxes already paid were offset.
The IR35 legislation is designed to target tax avoidance of individuals who charge for their services via their own intermediary, most commonly via a Personal Service Company (PSC). Where, but for the ‘intermediary’, an employment relationship exists between the individual and end user of their services, the IR35 legislation recovers the PAYE tax and National Insurance which would have been charged had the worker been directly employed.
Ms Adams believes she was (and is) in business in her own right and does not have the markers of an employee. Throughout the appeals, Ms Adams has claimed the contract between her company and the BBC was outside of IR35, and therefore payments made to Atholl House Productions Limited for her services should not be subject to PAYE at source.
April 2019: Ms Adams contested HMRC’s view and took the case to be heard at the First-Tier Tribunal. It was ruled that the BBC did not have sufficient control, nor first call on her services and that Ms Adams was not financially dependent on the BBC exclusively, confirming her self-employed status.
November 2020: HMRC appealed, taking the case to the Upper-Tier Tribunal. Whilst the judges agreed that errors in law were made in the previous hearing, they did however uphold the conclusion reached by the First-Tier Tribunal.
February 2022: HMRC was granted permission for the case to be further heard at the Court of Appeal. Again, they concurred that errors in law were made and requested further evidence for a hearing at the First-Tier Tribunal.
October 2023: The judges at the First-Tier Tribunal once again concluded that the factors for self-employment outweighed those of employment.
Kaye Adams' tax status of not being a ‘deemed employee’ has been upheld. On balance, the First-Tier Tribunal (FTT) concluded that the factors pointing to employment were outweighed by those that point towards self-employment. The FTT went on to conclude that the facts confirmed the BBC did not treat Ms Adams as an employee in any way. HMRC had throughout highlighted the commitment of time made to the BBC, but the FTT recognised there was a wider use of her working time on other engagements, which suggested she was in business in her own right.
Will HMRC appeal again? In our opinion, it is unlikely. There is little left for HMRC to present to the courts that have not already been considered. Plus, the strain on the Government purse strings will deter HMRC pursuing matters, where there has already been an estimated £250,000 spent on the case so far. HMRC has 56 days with which to submit an appeal, so we will see what transpires by 24 January 2024.
Will this case set any precedence in the IR35 world? Whilst each situation must be looked at on a case-by-case basis, HMRC will need to consider the aspects examined in this case and whether they have any bearing on the four other cases that are currently due to be heard at the Upper-Tier Tribunal. Whilst there have been immediate calls for IR35 to be scrapped, the more diplomatic approach will be for HMRC to address the issues with the complex IR35 rules.
As clearly evident, IR35 and employment status is a complex area with significant consequences if dealt with incorrectly.