The Upper Tribunal has rejected an appeal by TV presenter Christa Ackroyd over her tax status at the BBC, stating that she must pay NICs and income tax on her earnings, as she was an employee not a contractor
The dispute was over unpaid taxes, determined by HMRC to amount to £419,151 in tax and national insurance contributions (NICs) for tax years 2006-07 through to 2012-13.
Ackroyd argued that she was a freelance contractor and not a BBC employee. She was a presenter on the BBC’s Look North programme for more than a decade and supplied her services through her personal service company (PSC) - Christa Ackroyd Media Ltd (CAM). She worked under two successive fixed-term contracts between CAM and the BBC.
At appeal at the Upper Tribunal, Christa Ackroyd Media Ltd v Commissioners for Her Majesty’s Revenue and Customs [2019] UKUT 0326 (TCC), judges ruled that the First Tier Tribunal (FTT) was correct in asserting an ultimate right of control over Ackroyd, in other words was an employee, not a contractor.
Ackroyd argued that ‘she would never have entered into a contract with the BBC if it meant that the BBC would control the way in which she worked. However, we [the Tribunal judges] are concerned with the hypothetical contract. At most this has only marginal relevance in a finely balanced case as a statement of intention’.
This was rejected by the Upper Tribunal, who said that ‘it seems unlikely to us that the BBC would give Ms Ackroyd an entirely free role in Look North without at least an expectation that in carrying out her work she would abide by the Editorial Guidelines… the context suggests to us that the BBC through the Editor would have control over content given the BBC’s editorial responsibility’.
Mr Justice Mann and Judge Thomas Scott admitted in the Upper Tribunal ruling that they did not necessarily wholly agree with all the FTT’s reasoning, adding: ‘The FTT took the wrong approach but it reached the same result as if it had taken the right approach.’
However, the ruling stressed that ‘it was sufficient for the tribunal to ask itself the question “in so far as the Contract does not deal explicitly with all aspects of control, is it appropriate in view of the Contract and the wider context to conclude that ultimate control in relation to Ms Ackroyd’s services lay with the BBC?’.
Ackroyd’s QC, Jolyon Maughan, argued that ‘the FTT erred because, having correctly identified the need for a “framework of control” to exist in order for an employment relationship to arise, it failed to take into account that no such framework existed in Ms Ackroyd’s case. She had no line manager, was not subject to formal appraisals and such limited right of termination as existed under the Contract did not amount to control in the performance of her duties’. In oral argument, he stressed this point, stating that ‘the BBC lacked “effective sanctions” to control Ms Ackroyd’.
The Upper Tribunal dismissed the appeal, stating: ‘The only issue in this appeal is whether the FTT erred in law in reaching the conclusion that under the hypothetical contract posited by section 49, the BBC had a sufficient degree of control over the provision of services by Ms Ackroyd to satisfy the control requirement necessary for an employment relationship. For the reasons given, we conclude that the FTT made no such error. The appeal is therefore dismissed’.
An HMRC spokesperson told Accountancy Daily: ‘HMRC welcomes the judgment that the presenter is within the intermediary rules. HMRC has won the majority of tribunal decisions involving television presenters.
‘Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid we put things right.
‘It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and National Insurance contributions as employees.’
Peter Rayney FCA CTA, tax specialist and owner of Peter Rayney Consulting, said: ‘One of the fundamental criticisms of IR35 is that it is often not easy to determine whether a particular contract represents one of employment or self employment. There is a long line of employment and tax-related jurisprudence that demonstrates the complexities that are involved, and many decisions have shown inconsistencies in approach.
‘Yet the obligation to determine the tax ‘employed v self-employed’ status rested with the PSC owner (or perhaps more often than not, their accountant or tax adviser).’
Julia Kermode, chief executive of the Freelancer & Contractor Services Association (FCSA), warned that the upcoming offpayroll rules for the private sector would make the situation worse. She said: ‘The Ackrody case is another example that highlights just how complex employment status is and is further evidence that the government cannot expect businesses in the private sector to be held responsible for assessing the IR35 status of those freelancers and contractors they engage.
‘However, this is precisely what the government is planning to do when it extends the new off-payroll reforms to the private sector next year. HMRC cannot run rough shod over the freelance sector and penalise everyone working through limited companies in blanket fashion and assume that all these individuals are tax avoiders.’
Upper Tribunal ruling, issued 25 October 2019, Christa Ackroyd Media Ltd v Commissioners for Her Majesty’s Revenue and Customs [2019] UKUT 0326 (TCC) The case was on appeal after the original First Tier Tribunal ruling decision was released in March 2018 [Christa Ackroyd Media Limited v HMRC [2018] TC06334].
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