HMRC has won the first in a series of appeals concerning the application of employment intermediaries legislation to BBC television presenters, after a First Tier Tribunal (FTT) decided that IR35 applied to the arrangements under which the BBC contracted one of the presenters of a regional news programme, Look North
The appeal concerned the use by the BBC of ‘off-payroll’ arrangements for presenters, a practice which received significant publicity when the issue came before the public accounts committee (PAC) in 2012. Many presenters were engaged through personal service companies (PSCs) rather than directly as either employees or self-employed freelancers.
The case concerned Christa Ackroyd whose company Christa Ackroyd Media Ltd (CAM) was engaged under a seven year contract with the BBC to provide her services on up to 225 days per year. [Christa Ackroyd Media Ltd and the Commissioners for Her Majesty’s Revenue and Customs, [2018] UKFTT 0069 TC06334].
Ackroyd was appealing against demands for some £419,151 from HMRC relating to income tax and National Insurance contributions (NICs) for the tax years 2006-07 to 2012-13.
HMRC argued that the hypothetical contract between the BBC and Ackroyd would have been a contract of service rather than a contract for services, and that her status was that of an employee and that CAM Ltd should account for tax and NICs accordingly. For her part, Ackroyd contended that her status for the purposes of the intermediaries legislation was that of a self employed contractor, and there was no further liability on the part of CAM Ltd.
The FTT found that the hypothetical contract would have been a contract of employment. This was on the basis of mutuality of obligation; sufficient control of what, when, where and how Ackroyd performed her role; and the fact CAM had to provide Ackroyd, and not a substitute. The tribunal also found that Ackroyd would not have been in business on her own account.
In his ruling, the judge stated: ‘In our view a hypothetical contract of that length for at least 225 days per year and terminable only for a material breach points towards a contract of employment.
The existence of a seven- year contract meant that Ackroyd’s work at the BBC was pursuant to a highly stable, regular and continuous arrangement. It involved a high degree of continuity rather than a succession of short term engagements. That is a pointer towards an employment contract.
‘We do not consider that the fact the fees were payable on a monthly basis akin to the way an employee might be paid is significant. Nor is the absence of any provision for holiday, sick pay or pension entitlement.’
The tribunal was satisfied that the BBC could require Ackroyd not only to work on a particular day, but also it could direct what work she did. They could require her if necessary to report on a particular story without also presenting the Look North programme.
The contract also contained what the judge called ‘a clear restriction’ on what Ackroyd could do in relation to other activities, whether or not she wanted to engage in such activities. The effect was that she could not provide services as a television presenter or broadcaster in the UK or the Republic of Ireland without the consent of the BBC. She could not provide services for publications other than for the BBC without the consent of the BBC.
The tribunal concluded: ‘We do not consider that Ackroyd could fairly be described as being in business on her own account. She was economically dependent on the hypothetical contract with the BBC which took up most if not all of her working time.
‘In our view the most significant factors in the present case include the fact that the BBC could control what work Ackroyd did pursuant to the hypothetical contract. It was a seven year contract for what was effectively a full time job.
‘Standing back and making an overall qualitative assessment of the circumstances we consider that Ackroyd was an employee under the hypothetical contract. If the services provided by Ackroyd were provided under a contract directly between the BBC and Ackroyd, then Ackroyd would be regarded for income tax purposes as an employee of the BBC.’
The FTT made clear that this appeal is one of a number of other appeals involving television presenters and PSCs, but said it is not a lead case as such.
An HMRC spokesperson said: ‘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.’
Andy Chamberlain, deputy director policy for the association of Independent Professionals and the Self Employed (IPSE) said: 'This case is significant for several reasons: it’s the first IR35 ruling for seven years, it has resulted in an extremely large tax bill for an individual, and it shows that the original IR35 legislation, deeply flawed though it is, can be made to work when HMRC actually enforce it.'
Commenting on the case Bill Longe, head of employer solutions at RSM said: ‘This has been a long running issue for television presenters working through personal service companies for the BBC, and for the BBC itself.
‘In this instance, it was particularly hard for the tribunal to side with the appellant given her co-presenter on BBC Look North was an employee rather than a contractor.
‘We know that HMRC has taken a close interest in BBC presenters working through personal services companies and opened 100 investigations into BBC stars. Although this is not a lead case, this decision will nevertheless be seen as a setback for other appellants taking similar cases to the tribunal.
‘Clearly these types of arrangements pose further reputational risk to the BBC and a huge financial risk to contractors.’
