Kaye Adams wins IR35 case over BBC Radio contracts
Broadcaster and freelance journalist Kaye Adams has become the latest TV star to win an IR35 appeal at the First-Tier Tribunal, following claims by HMRC that her work for BBC Radio Scotland effectively made her an employee of the Corporation – a situation that resulted in her being charged an additional tax & National Insurance bill for nearly £125,000.
The Loose Women host appealed HMRC’s assertion and won, despite the Tribunal finding that her contract with the BBC met the basic minimum conditions for employment. In a departure from more recently established employment status logic, the Court cited her 20-year career as a self-employed freelancer, the fact that the BBC did not have her on a “first-call” basis, and a lack of employment benefits such as sick pay and maternity leave as compelling enough reasons to tip the balance of her arrangement towards self-employment, ruling that her BBC contract was “outside IR35” and thus allowing the appeal.
Further ancillary factors included a requirement on Adams to provide her own clothing and equipment, lack of access to the BBC’s IT systems, lack of BBC control over her other work and Adams generally being treated by the BBC as an external contractor, specifically in regard to internal recruitment processes.
The decision comes less than a month after Lorraine Kelly also won an IR35 appeal, in her case concerning a potential £1.2 million tax & NI bill levied on her payments from ITV, in what increasingly appears to be an ill-conceived attack on the broadcasting sector by HMRC in respect of employment status. Historically, entertainers and performers have worked mainly on a self-employed basis without substantial challenge from the Revenue.
The judgement will be of key interest to thousands of Adams’ colleagues at the BBC, due to reforms to IR35 in the public sector introduced in 2017 leaving the BBC responsible for IR35 assessments rather than individual contractors themselves. The Corporation has struggled with the complex determinations, causing a group of 170 presenters including Victoria Derbyshire, Naga Munchetty and Dan Snow to write an open letter to BBC director Tony Hall in March 2018 complaining about the BBC’s handling of the implementation of the IR35 reform, known as the “Off-Payroll” rules.
The letter prompted a National Audit Office inquiry that revealed that as many as 5,000 BBC contractors were affected by Off-Payroll. A subsequent House of Commons Culture Committee hearing heard evidence from an anonymous BBC presenter who told the committee that she had tried to commit suicide due to the enormous stress that the BBC’s botched Off-Payroll implementation had put her under.
Adams’ recent appeal, and Lorraine Kelly’s before it, will provide much needed clarity on the Court’s interpretation of employment status specific to the broadcasting and entertainment sectors. Both decisions have explicitly ruled that editorial control of content in-and-of-itself is an insufficient level of control to be a pointer towards employment, for example.
Recent IR35 cases have placed substantial weight on the employment status criteria of control, personal service and mutuality of obligation, whilst taking a narrow “per contract” view of an individual’s working arrangements. Judge Beare’s decision takes a step back from this approach, taking into consideration all of the relevant factors that could have indicated employment or self-employment, as well as Adams’ career as a whole, to adopt a highly qualitative (or “picture painting”) method that ultimately determined her self-employed status.
Adams actually failed the personal service and mutuality of obligation tests, and was under a fair amount of control over how and when to perform the work – factors which in other cases may have led to an “inside IR35” decision – but in the context of Adams’ case, other factors were deemed to outweigh these traditionally heavyweight employment indicators sufficiently enough for her to be considered as self-employed for tax purposes. The Court’s methodology may be open to appeal by HMRC at the Upper Tribunal, however.
The case is therefore illustrative of just how complicated IR35 determinations can be, and of how a “checklist” approach to assessing IR35 status is inherently flawed – a fact that critics of Off-Payroll, and IR35 in general, consistently cite as a major reason behind IR35’s almost impossible complexity.
Off-Payroll is due to be extended to the private sector in April 2020, when thousands of medium- to large-scale businesses will suddenly become responsible for assessing their contractors’ employment statuses in bulk, overnight. Tax experts and industry bodies are concerned many contractors will become erroneously over-taxed as a result, with potentially disastrous consequences for the UK’s flexible workforce as a whole.
The Tribunal’s decision also addresses an issue which was hitherto a major bugbear of IR35 critics: statutory employment benefits such as sick pay, annual leave, maternity/paternity leave and pensions are almost never available to contractors, even if IR35 says they are employed for tax purposes. Judge Beare’s decision in this case gave such factors due consideration, and the lack of employment benefits had a significant bearing on the overall decision. Should the Courts take this view consistently moving forwards, it would begin to address this asymmetry, but also make it much harder for independent contractors, who seldom receive such luxuries, to be considered disguised employees.
The full decision can be found here: http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11052/TC07088.pdf
24th April 2019.