IR35: Adrian Chiles won showdown with HMRCby
Sports broadcaster and former One Show presenter Adrian Chiles is the latest TV and radio presenter to face HMRC in the tax tribunal over IR35. Rebecca Seeley Harris reports on the outcome.
Adrain Chiles started working for the BBC as a journalist in 1992. In 1996 the BBC required him to cease his employment and continue providing those services through what has become known as a personal service company. He set up Basic Broadcasting Ltd (BBL) for that purpose.
During the tax years covering 6 April 2012 to 5 April 2017 BBL provided Chiles’s services under two ITV contracts and three BBC contracts in addition to other work for other parties. HMRC issued determinations for income tax and NICs to BBL for those tax years amounting to £1,249,433 and £460,739 respectively.
When the IR35 intermediaries legislation comes into play, the tribunal is required to consider the hypothetical contract, in this case, between BBL and the BBC and ITV. The question before the tribunal was whether the services provided by Chiles were provided under contracts directly between ITV/BBC and the sportscaster. If so, would Chiles be regarded for income tax purposes as an employee of ITV/BBC?”
In November 2021, BBL applied for disclosure of material in relation to IR35 decisions concerning television and radio presenters currently on appeal to the Upper Tribunal and the Court of Appeal, but HMRC refused. That stance was surprising because both Kickabout Productions vs HMRC (concerning radio presenter Paul Hawksbee) and HMRC v. Atholl House (concerning TV presenter Kaye Adams) were appealed and were being heard in the Court of Appeal in the last two weeks.
Mutuality of obligations
The tribunal considered that there was sufficient mutuality of obligations in relation to all the hypothetical contracts and a sufficient framework of control to establish that Chiles would be performing his services as an employee.
Although the tribunal found that the broadcasters do have a sufficient measure of control to establish that there is a case for a contract of employment, the tribunal did not consider the extent of the broadcasters’ control, in either case, was a compelling factor.
In business on his own account
In the tribunal’s view, the most significant factor that might displace the prima facie case that Chiles was an employee is whether he was “in business on his own account”. This is the same approach taken by the Upper Tribunal in the Atholl House case and in other cases. It involves a value judgment and will depend on various factors which will carry different weight in the overall analysis.
It was agreed that for the other work Chiles undertook he was in business on his own account, albeit through BBL but it remained to be proven that the ITV and BBC contracts were contracts of employment separate to that business.
The factors that confirmed Chiles was in business on his own account included the number of clients he worked for and commercial projects he took on that did not bear fruit. Chiles also paid 15% of his income to his management company Avalon to advance his career and reputation.
Chiles did considerable research and provided some equipment but, HMRC argued that he was an integral part of the business of ITV and BBC. The tribunal thought otherwise. The judges considered that he may have been an integral part of the programme, but not their businesses.
HMRC also placed reliance on the absence of substitution. Both ITV and BBC contracts specifically prevented Chiles from providing a substitute. The tribunal thought that the absence of rights to provide a substitute does not indicate that these contracts were outside of Chiles’s established business activities.
Looking at the whole picture…
Standing back and looking at the whole picture, the tribunal considered that the hypothetical contracts were part of Chiles’s business and that the IR35 legislation did not apply.
This is a very thorough judgment for a first-tier case, but at this level, it does not set a precedent. It is highly likely that HMRC will appeal.
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Rebecca is the UK's most prominent thought leader and leading expert in ‘employment status’ including IR35, off-payroll working and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years covering all employment status issues such as...