Learning lessons from the Kaye Adams IR35 marathonby
Addressing why Kaye Adams’s IR35 case took so long to resolve, Dave Chaplin looks at what we can learn and advises taking HMRC’s guidance with a pinch of salt.
Much has been written about the case of broadcaster Kaye Adams and her nine-year IR35 nightmare in the case of Atholl House Productions Ltd vs Revenue & Customs. Last week Rebecca Cave described the fight as a marathon and asked, “Why did this dispute take so long to resolve?”
Rather than rake over the finer details of the case embodied in 206 pages of four hearing decisions, let’s address Rebecca’s question. I’ll take you on a personal journey.
Adams first rang me in January 2019 to ask for my help on her IR35 matter. She was heading to a tax tribunal and was concerned about the feedback she had heard from an appeal the previous year where HMRC was represented by two experienced barristers, one a King’s Counsel, against a taxpayer with less experienced firepower. Adams was concerned she may need equally talented representation and quickly instructed Counsel of her own.
Journey towards IR35 advocacy
Six months before her call in April 2018, I’d begun my journey towards IR35 advocacy by attending the IR35 case involving three BBC presenters, Paya Ltd & Ors vs Revenue & Customs – my first tribunal hearing. Before that, I’d read all other 33 IR35 decisions since 2001 and related cases. Since then, I’ve personally attended a dozen more IR35 hearings and helped fight four of them, including hers.
On top of that, I’ve watched countless other hearings involving status matters, such as Uber and PGMOL, and read volumes of other case decisions, past and present. The rabbit hole goes deep: contractual construction, contractual interpretation and statutory interpretation, to name just a few.
So, what have I learned from this obsession with status and IR35 from the front line, and how does this tie into the Adams case? Well, firstly, despite becoming an expert on a thing that should not be a thing, that thing is unlikely ever to disappear. HMRC has won the war on off-payroll workers, with many more returning to PAYE. Still, many of us are worried that HMRC has accidentally nuked the freelance sector and distorted the market, undermining the growth engine of the economy – the self-employed.
I’ve learned that winning cases isn’t solely about the law and legal arguments. Facts are everything. And without a robust corroborated fact pattern, the enquiry wheels will keep spinning while HMRC covers its tin ears. Hearsay isn’t loud enough to get them listening.
The third thing is the most alarming. I’ve begun to question how trustworthy the state is and its relationship with natural justice and the rule of law. Regrettably, in my experience, overzealous people in HMRC have skewed, ignored or dismissed the facts designed to fit preconceived views on status. There is an infamous case called MAL Scaffolding vs Revenue & Customs  UKSPC SPC00527, where the Special Commissioner, David Williams, said: “The Commissioners appear to have approached their investigations on the basis that there must be an employment relationship between MAL Scaffolding and the workers there if one looks hard enough. Officers then went looking on that basis and persuaded themselves that they had found that for which they went looking. They have totally failed to persuade me.”
In a case similar to Adams’s, the taxpayer informed me that they had repeatedly told HMRC that what HMRC was claiming was wrong and that HMRC should speak to a list of people (a list of names was provided) who would corroborate what they were saying. HMRC chose not to meet the taxpayer nor reach out to any of the people. The appeal inevitably failed without corroborated facts to discharge the burden of proof.
HMRC’s Litigation and Settlement Strategy (LSS) is explained in a document titled Resolving tax disputes. The two following sentences are particularly relevant in light of the Atholl House case.
- “HMRC will seek to work with the customer to understand fully the relevant facts and law, sharing and testing HMRC’s own arguments, and fully understanding and testing the customer’s arguments, before reaching a considered view on the strength of its case.”
- “Resolving those disputes which do arise in a way that establishes the right tax due in accordance with the law at the least cost to HMRC and to its customers. In most instances, this can be achieved through working collaboratively.”
In many cases, including Atholl House, there appears to have been a stark departure from those principles. HMRC publishes many guidelines that the public seeks to trust, but we are often reminded of their reliability. In Revenue and Customs vs Sippchoice Ltd  UKUT 87, Mr Justice Roth said: “Statements in HMRC’s manuals are merely HMRC’s interpretation of the law in their internal guidance and they do not have the force of law. We must interpret the legislation in accordance with the principles of construction described above and if we conclude, as we have, that the legislation bears a different meaning to that found in the HMRC manual, the legislation must be preferred.”
Some more worrying developments are appearing in HMRC guidance around IR35 matters, which do not align with the long-standing law, about which HMRC was reminded by the Court of Appeal. One part of HMRC guidance infers that HMRC will focus primarily on the working conditions of the contract, effectively ignoring the contractual terms. That stance contradicts the statute, common law, rules of evidence, and how HMRC’s Counsel works cases in the tribunals.
So, my IR35 advice to readers is this – digest the HMRC guidance with a pinch of salt, then build a firm foundation on the law, and make sure you have your corroborated facts ready for when HMRC knocks on the door.
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Dave Chaplin is the CEO and founder of contracting authority ContractorCalculator and tax compliance firm IR35 Shield. Dave was an IT contractor before founding ContractorCalculator in 1999. IR35 Shield enables firms, agencies and contractors to remain...