HMRC has lost an IR35 case against Atholl House Productions Limited, the personal service company (PSC) of television presenter Kaye Adams. The decision, which will still require remitting to a lower tribunal, came after the Court of Appeal had unanimously rejected two grounds of appeal made by HMRC.
HMRC sought to argue that the Upper-tribunal had been mistaken in its interpretation or application of the “third limb” of the Ready Mixed Concrete (RMC) test for determining worker status. While the first two stages of RMC focus on aspects such as mutuality of obligation, control and personal service, the third stage includes several “other factors” that could mean a final decision differs from conclusions drawn after the first two stages.
One of these third stage factors is whether the worker in question is “in business on their own account” (sometimes shortened to IBOOA), something that is considered vital in cases where the first two stages of RMC do not reach a definite conclusion. In Kaye Adams’ case, she was determined by the First Tier Tribunal and Upper Tier Tribunal to fall outside IR35 for work done between 2015-2017 because, despite personal service and sufficient control being applicable, she was found to be in business on her own account.
In the case against Atholl House, HMRC argued that RMC was a different test to Hall v Lorimer (a labour law case focusing on IBOOA) and that the extent to which IBOOA could displace a determination of employment status following the first two stages of RMC should be slight. According to HMRC’s appeal, taking into account the status of a worker over their entire career would place an “unduly onerous compliance burden” on the tax authority and on organisations or businesses attempting to determine workers’ IR35 status.
These claims were rejected by the Court of Appeal, which ruled that status determinations should focus on the full range of facts relating to a worker, including whether they are in business on their own account and taking into consideration work separate from the relevant engagement.
The decision has led to claims that HMRC will need to revise its interpretation of the law on employment status, as well as guidance products, such as its CEST (Check Employment Status for Tax) tool.
