HMRC loses on appeal to the Upper Tribunal in Kaye Adams IR35 case

The off-payroll working rules were introduced to the private sector in April 2021 for medium and large organisations. Before the new rules, it was up to the contractor to determine their own employment status. Organisations receiving services from contractors must now assess the employment status of contractors they use and ensure PAYE is operated where the client assesses that the relationship is one of employment.

The underlying law on employment status remains the same both before and after the introduction of the off-payroll working rules and therefore the ever-increasing body of case law remains relevant. There have been many tax cases on the employment status of television and radio presenters. HMRC has lost its appeal in the latest decision which relates to the TV presenter Kaye Adams.

Kaye Adams is well known for her appearances on ITV’s show Loose Women, The Kaye Adams Programme on BBC Radio Scotland, Sky and as a newspaper columnist. She provided her services through a personal service company, Atholl House Productions Ltd, and had submitted her tax returns on the basis that she was an independent contractor.

HMRC had argued that, in relation to her radio show The Kaye Adams Programme, fees received from the BBC should have been treated as employment income because the intermediaries legislation (known as IR35) applied. The taxpayer won on appeal to the First-tier Tribunal in 2019 (Atholl House Productions Ltd v HMRC [2019]). HMRC appealed to the Upper Tribunal on the basis that the First-tier Tribunal had erred in law in its application of case law principles.

In the Upper Tribunal, the judges considered the application of the control and mutuality of obligation tests to a hypothetical contract between Ms Adams and the BBC. It did find that there was mutuality of obligation (the obligation for the BBC to provide work and for Ms Adams to accept it). On the issue of control, the Tribunal did find that the BBC had a control framework but that, in practice, Ms Adams had a great deal of autonomy in determining the content of shows and leading the direction of shows while on air. It concluded overall that, under the hypothetical contract, in relation to these tests of mutuality of obligation and control, Ms Adams would have been an employee of the BBC.

Nonetheless, the Upper Tribunal considered that, on the basis that Ms Adams was carrying on a business on her own account, she was found to be outside IR35. This was in line with the earlier findings of the First-tier Tribunal. On that basis, HMRC’s appeal was dismissed.

It remains to be seen whether HMRC will appeal this decision.

 Moore Kingston Smith comments:

This case has clearly highlighted the importance of a contractor working for other organisations and not being financially reliant on one engager (i.e. being in business on their own account) in determining front-of-camera contractor’s employment status.

The HMRC tool (Check Employment Status for tax) used by many organisations to determine employment status can reach an employment status conclusion without considering this “business on own account” factor. A more bespoke and detailed assessment of the contractors working practices is required, which should involve obtaining details of the contractor’s other freelance engagements, and application of any other relevant case law.

Of course, relevant case law is likely to increase further in the coming months as we see more front-of-camera TV personalities such as Gary Lineker being the latest target of HMRC regarding tax and employment status.