HMRC’s campaign of targeting the supposed tax-avoidance of entertainers is not going well. Lorraine Kelly and - just yesterday - Loose Women star Kaye Adams both won their tribunals by a substantial margin, with the judge of Kelly’s case attesting that it wasn’t a remotely borderline decision.
These results are certainly favourable for the likes of Ant and Dec, Holly and Phil and Eamonn Holmes particularly, whose ruling is due any day now. It does beg the question, however: why does the taxman keep trying to nail these household names as inside IR35?
Kaye Adams, Lorraine Kelly and Christa Ackroyd
There are certainly similarities between Kaye Adams, Lorraine Kelly and Christa Ackroyd. All three are successful journalists that have worked with national broadcasters and all three have been subject to IR35 investigation at the hands of HMRC. However, while Adams and Kelly won at least their First-Tier Tribunal rulings, Ackroyd lost hers.
Kaye Adams background
Adams has been a freelance journalist since the mid-1990s, providing her services via her limited company Atholl House Productions Limited (AHPL) to the BBC and other media organisations.
Originally, AHPL appealed against four tax and National Insurance Contributions (NICs) assessments opposed by HMRC. The Treasury dropped its opposition to the appeal against years 13/14 and 14/15, leaving years 15/16 and 16/17 to be decided by the Tribunal. The total tax & NIC payment at stake was just shy of £125,000.
The two BBC contracts which were central to the appeal covered the periods from March 2015 – March 2016 and April 2016 – March 2017, relating to the ‘The Kaye Adams Programme’ aired on BBC Radio Scotland, 3 hours each weekday. Each contract required a minimum commitment of 160 programmes for which AHPL would be paid £155,000 per agreement.
Kaye Adams IR35 decision
Just like the Lorraine Kelly case, Adams had no realistic right of substitution.
The First-Tier Tribunal (FTT) considered that there was sufficient Mutuality of Obligation (MOO) to establish a contract and that the BBC had editorial control over output. What the national broadcaster did not have control over was Adams herself, who was free to undertake work for other clients. Indeed, the BBC actively accommodated her other commitments.
The Ready Mixed Concrete case of 1968 requires three conditions to be satisfied for a contract of service to exist, viz:
- Personal service & MOO;
- Sufficient degree of control; and
- Other provisions of the contract are consistent with it being a contract of employment.
More often than not, HMRC thinks they’re home and dry if they can prove the presence of personal service and control during a contract. In actuality, all three of the trinity of employment status must be aligned.
This point was not lost on the judge, who took a holistic approach and found that Adams was not part and parcel of the BBC. Adams was instead found as an external services provider who had other sources of income; this couldn’t be ignored, albeit that HMRC would have preferred to do so.
Adams and Ackroyd
The impression formed by the Tribunal was that Adams carried on a profession on her own account in the same way as did the vision mixer, Mr Lorimer, in the 1993 case of Hall v Lorimer.
It was conceded, however, that the BBC had some right of control over Adams’ work. Considering that this was the test that felled Christa Ackroyd last year, this could mean one of two things. Ackroyd could see an opportunity to appeal her decision, galvanized by Kelly and Adams’ recent triumphs. Alternatively, HMRC could have another dart at Adams by appealing the FTT’s decision on the back of Ackroyd’s previous loss. Judging from the Treasury’s track record, the latter is more likely.
Regardless of what comes from this latest ruling, the taxman has had its nose bloodied once again. These recent defeats serve as severe dents to HMRC’s current pursuit of media workers; if the Eammon Holmes decision goes against them, the department should seriously reconsider their current campaign.
Does HMRC understand IR35?
Ahead of HMRC doing any strategy analysis (or soul-searching), these recent defeats have started to raise questions in the mainstream media that tax and IR35 experts have been asking for some time now. Does HMRC understand how to apply the off-payroll rules? Why are they specifically targeting high-profile ‘tax-avoidance’? When will adjustments to the legislation be made in accordance with the widespread criticism it's received?
HMRC’s application of IR35 is muddled, changing from case to case with no real standardisation or direction. The recent spate of high-profile investigations may have been intended as a proverbial ‘head on a spike’, but with every lost case, the Treasury seems more desperate to prove that the legislation is viable. Instead of admitting fault with and amending IR35 and the CEST tool, the taxman instead continues to charge mulishly forward, leaving a trail of unnecessary stress and wasted public money in its wake.
You can read the full report here.