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Adrian Chiles at the Baftas | accountingweb | IR35
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Chiles’s IR35 case could stretch to second decade

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With HMRC appealing Adrian Chiles’s IR35 case to the upper tribunal, employment-status cases look likely to be with us for some time to come.

15th Feb 2024
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In 2022, Adrian Chiles won his IR35 tax case against HMRC, which was pursuing him for £1.7m in income tax and national insurance contributions (NIC). To summarise, Chiles (above, at the BAFTAs) started working for the BBC as a journalist in 1992. In 1996 the BBC required him to set up a personal service company providing his services through Basic Broadcasting Ltd (BBL).

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 NIC to BBL for those tax years amounting to £1,249,433 and £460,739 respectively.

Mutuality of obligations

The first tier tribunal (FTT) found that there was mutuality of obligations between the parties and a sufficient framework of control but, that Chiles was providing his services “in business on his own account”. So, ultimately, the tribunal held that the contracts were contracts for services not contracts of employment.

HMRC appealed this case to the upper tribunal (UT) and that was heard on 6 February 2024. 

During the UT appeal hearing, HMRC’s legal representatives contended that the FTT had erred in law. Adam Tolley KC, acting on behalf of HMRC, asserted in written submissions that ITV and BBC’s “rights of control” over Chiles’s work was “entirely consistent with a relationship of employment”.

Substantial, predictable and long-term contracts

According to Tolley, Chiles was under contractual engagement with the broadcasters for the entirety of the relevant tax years, operating under contracts that were “substantial, predictable and long-term” in nature. He emphasised that the extent of control exerted by ITV and the BBC over Chiles’s services strongly suggested an employer-employee dynamic.

On the other hand, James Rivett KC, representing Chiles, argued in written submissions that BBL was established in 1996 at the BBC’s insistence, with the aim of transitioning Chiles’s services through what is commonly referred to as a “personal service company”.

Multiple clients

Rivett pointed out that since its incorporation, Chiles had provided services through BBL to nearly 100 different third parties. He maintained that the FTT’s decision was both logical and well considered, following a meticulous examination of the case’s intricacies.

He noted that HMRC’s current actions represented a clearly unjust effort at this late juncture to introduce an entirely new legal and evidentiary argument, criticising the organisation’s failure to pinpoint any legal errors in its approach.

Second decade of stress

Furthermore, Rivett emphasised that if the case were to be re-heard by the FTT, it would prolong the litigation into “a second decade”, potentially exacerbating Chiles’s mental health concerns and subjecting him to additional stress.

Chiles has undertaken various roles during his tenure at ITV, including co-presenting the Daybreak breakfast show on GMTV and covering Champions League and international football matches. His contributions at the BBC encompass appearances on The One Show, Match of the Day 2, The Apprentice: You’re Fired and Radio 5 Live.

The appeal was heard by Mr Justice Meade and Judge Thomas Scott and the judgment will be published in due course.

Historical cases

Gary Lineker was also in the tax tribunal in 2022 and he won his case against HMRC for £4.9m. That case, however, was unusual because it involved a partnership. The argument was whether the partnership came under IR35 or not.

These IR35 cases are all historical and have been going on for many years. Although everyone uses the phrase IR35, even now it actually only refers to when the contractor was obliged to make an assessment on their own employment status and was, therefore, liable for any tax that was owed. Of course, we now have the off-payroll working (OPW) rules where the client is responsible for making the assessment and liable for the tax.

Awaiting judgment

There have been several other cases that have been heard on appeal that are still awaiting judgment, with the Professional Game Match Officials Ltd (PGMOL) being probably the most notable. PGMOL was in the Supreme Court in July 2023 and we are still awaiting judgment. That case is focused on mutuality of obligations, the overarching contract of employment and whether the individual contract constitutes a contract of employment. That case is not an IR35 case though, as the football referees are all self-employed.

The case of HMRC vs RALC (an IT contractor) and McCann vs HMRC (Neil McCann is a football pundit) have both been heard at appeal in the UT and are also awaiting judgment. These two cases were also heard under IR35 rather than the OPW rules.

Increased compliance activity

In 2021, there was news that HMRC had collected around £260m from its own government departments. That was under the new OPW rules that came into force in 2017 in the public sector. There have been no tribunal cases as yet under OPW, which came into the private sector in 2021. HMRC promised a “soft landing” in the first year of OPW but now the industry is reporting increased compliance activity from HMRC, which will no doubt lead to the first tribunal action probably in 2025 at the earliest.

Replies (25)

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the sea otter
By memyself-eye
15th Feb 2024 17:03

So in 2024 in the UK the mantra from the tax authorities (and therefore the government) is 'be an employee' or don't work at all. From the millions choosing to not work at all it's clear this country is going to hell in a hand card - pushed by an employee, obviously.

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7om
By Tom 7000
16th Feb 2024 10:44

Well I have been doing this a long time and fundamentally. The reason this all happens is that the Government simply didn't equalise the tax rules, probably for political reasons, ie putting taxes up doesnt look good, because they wont go down.

People will always want to pay the lowest amount of tax, its human nature

Personally, I think if you get no holiday pay, no sickness, no employment rights etc then you have given this all up and as a reward theres a bit less NIC . I fundamentally think its wrong that HMRC can jump in between a business relationship and say its something else.

If I was the chancellor, I would have simply equalised the tax rules, well, they have pretty much done that now ( took them 20 years though) with dividend tax and none of this nonesense and stress would ever have happened.

But what do I know....

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Replying to Tom 7000:
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By cereus77
16th Feb 2024 11:19

I agree with most of your comment but respectfully beg to differ with the last paragraph; the government has gone too far with the dividend tax, which now means higher earning freelancers have to pay more tax than employees but without any benefits or job security.

The dividend tax was elevated to 8.75% across all dividend income, when the NIC rise was planned last year but when they reversed the NIC increase and then reduced it by 2%, neither of these adjustments were reflected in the dividend tax.

As a freelancer for over 20 years, I feel completely victimised by the government and HMRC. Having been forced to work through a limited company by all the multinationals and agents I work through more or less since the beginning of IR35, and indeed as an unintended consequence of that poorly thought out legislation, I’m now between a rock and a hard place. Of course I could pay myself mainly in salary but then I would have to swallow 13% employer’s NICs across the whole lot in addition to the employees. And in case you might suggest that somehow the contract rates I earn include the employer’s NICs, I would strongly refute that - those were trousered by the companies using contract resources in most cases.

As an independent, working in the same field for the last couple of decades, I have seen my rates stay more or less the same whilst employees get regular pay rises. So in my view, far from levelling the playing field, the government is pushing everyone into employment and it just isn’t possible or wanted by all the affected freelancers or the companies which need freelance resources for their projects.

The sector rarely gets a mention in the news which is a further aggravating factor - we have no representation.

I’m afraid I strongly feel that the government in the last ten years, with Brexit, the Dividend Tax, CT increase, and its off payroll “enhancements” to IR35 has done a great job of destroying the once thriving market for British IT and service contractors across Europe. Not something I would have expected - particularly from the Tories who historically are supposed to favour small business.

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Replying to cereus77:
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By roger brisley
16th Feb 2024 12:32

Sadly I do not think this government recognises the existence and relevance of any business smaller than a medium sized company, regardless of whether they are incorporated or not. And that's before any one mentions Brexit....

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Replying to cereus77:
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By roger brisley
16th Feb 2024 12:32

Sadly I do not think this government recognises the existence and relevance of any business smaller than a medium sized company, regardless of whether they are incorporated or not. And that's before any one mentions Brexit....

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Replying to cereus77:
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By rmillaree
16th Feb 2024 12:42

And in case you might suggest that somehow the contract rates I earn include the employer’s NICs, I would strongly refute that - those were trousered by the companies using contract resources in most cases.

thats nonsense practically speaking - business is business and it is what it is - no one forces you to take any job - i am presuming you are agreeing you know the score in that regard before proceeding

so you either agree whats on the table or dont - its 100% your choice whether you take the package or not. If engager needs your services enough they will presumably stump up extra - if they have other peeps happy to take the offer on the table when you dont well that is what it is. Facts are if they need the worker they will pay going rate.
In any practical respect its like any other negotiation ref rates - basically same as asking for x% extra in hourly rate and refuisng work if you dont get it.

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Replying to cereus77:
By tonyaustin
19th Feb 2024 18:22

There is no legal requirement to use a limited company. An individual can be self-employed. Being self-employed or a contractor using a PSC means they have to charge more than an employee to compensate for no employee benefits, additional tax, IR35 risk etc. Once upon a time, CT was 42% or more, a company was not tax-efficient and companies using contractors ended up paying the contractors' tax, after they left, because they were considered by HMRC (Inland Revenue) to be employees and the employer failed to deduct PAYE. Why do you think companies, like the BBC, insisted on contractors using companies? You cannot operate PAYE on payments to companies. Hence the recent Off Payroll tax rules.

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Replying to tonyaustin:
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By cereus77
19th Feb 2024 21:12

Unfortunately the law is more or less completely subservient to how the market works. A market which is fairly sewn up by agencies and it is those agencies which insist on contractors having personal service companies. You are free to ask to contract as a freelancer or to ask for a higher rate but the agent’s Ts and Cs obligate you to work through a PSC and asking for a higher rate frequently results in losing the role to someone who will accept a lower rate. In my experience, at this point in the engagement there is rarely good clarity as to the likely quality of delivery from the competing resources and the paramount consideration for the agent tends to be the cut they get. Regrettably this is an area where UK law has failed to protect freelancers so there is no obligation for the agent to disclose the margin they are making on the deal; information I have always regarded as highly relevant for the contractor to know as it is a key factor in future flexibility for an increase and in understanding client perception of value for money.

On the off payroll; this was unnecessary in my view as they had already more than addressed the situation with the dividend tax.

The other issue for freelance resources is as you allude; large companies cynically laying off permanent staff and bringing them back as contractors. I am minded that it is this factor, particularly prevalent in the late 90s and early years of the millennium, which has been most influential in driving the IR35 legislation much to the detriment of the many genuine freelancers who move from contract to contract in their quest for continuing work.

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Replying to cereus77:
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By RogerMT
21st Feb 2024 10:55

"... particularly from the Tories who historically are supposed to favour small business." At least that particular con is now in the open, although most voters can't see beyond that other great Tory con, controlling immigration, which they have spectacularly failed at. At least it looks like they're in for a well deserved and very overdue thumping in the forthcoming GE!

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Replying to RogerMT:
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By johnjenkins
21st Feb 2024 11:03

Unfortunately it doesn't matter who gets in, we don't have politicians capable of getting the job done. Boris did but then let himself down.

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Replying to Tom 7000:
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By Paul Crowley
19th Feb 2024 16:50

NI has limits. Dividend tax has no limit and starts at £1,000
Not really equal

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Replying to Paul Crowley:
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By rmillaree
19th Feb 2024 17:18

"NI has limits" -- hmmmmm whats the limit on employers ni ?

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Replying to Tom 7000:
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By Paul Crowley
19th Feb 2024 16:50

duplicate

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By rmillaree
16th Feb 2024 11:08

i think it really is poor form hmrc taking on individuals like this to higher level - unless its pretty clear its the wrong decision.

hmrc officers who rubber stamp the continual harassment of peeps - should personally have to evidence they have very high chance of success - from "independent advise"

i suspect they are appealing due to the fact they can and that no officer even needs to provde that that its highly likely they will win. From the cases they lose regulalry it mostly appears that they never had more than 50% chance of success from the start. If they are disagreeing with tribunal surely they want something much higher than 50/50 before proceeding - facts are you laid out your case and you lost ! if you dont want to lose rewrite rules so they do the job you want.

pay adam a fortune and i am sure he can argue anything

Adam Tolley KC, acting on behalf of HMRC, asserted in written submissions that ITV and BBC’s “rights of control” over Chiles’s work was “entirely consistent with a relationship of employment”.

yeah thats your opinion and you would say that others may say otherwise - presumably then ftt looked at it and reasoned that this argument was horlocks!

I wont deny that perhaps there is a 50% chance this could get overturned who knows but it seems like its waaay to complicated process if the "tribunal" isnt fit for pourpose and getting it wrong

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By Postingcomments
16th Feb 2024 13:13
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By Justin Bryant
16th Feb 2024 13:15

The only good thing one can say about IR35 is that (unlike the 2019 LC) hopefully no-one has committed suicide over it, but no doubt some of those targeted must have come close to at least thinking about it.

As for this Government, I can't think of anything good at all to say about it, except that it will thankfully no longer exist within a few months.

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Replying to Justin Bryant:
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By johnjenkins
16th Feb 2024 14:52

Unfortunately the next Government will be just as bad. The turnout will be really low as evidenced in the 2 by elections. Most people are sick and tired of the political charade that proports to be Government and opposition.
When a brand new party can get 10% of the votes, that has to be (not only a strong warning) an indictment of what we have a choice of.

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Replying to johnjenkins:
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By a_q
16th Feb 2024 17:14

Only the Monster Raving Looney Party can save us.
Sadly there isn't a candidate in my constituency, so I abstain.

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By Rob Swan
16th Feb 2024 13:38

Another never-ending debacle created by HMRC (His Majesty's Random Calculator).

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By PAULLEWISFCCA
16th Feb 2024 14:55

are enough tired of being tax slaves yet

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Replying to PAULLEWISFCCA:
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By a_q
16th Feb 2024 17:15

Surely, we have now paid for the Napoleonic Wars, and it's time to end it.

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Replying to a_q:
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By PAULLEWISFCCA
16th Feb 2024 18:04

i reckon so

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Dave Chaplin
By Dave Chaplin
16th Feb 2024 18:06

The Adrian Chiles case (BBL) in currently subjudice, so to avoid contempt of court I won't opine on the case, despite being at the two day UT hearing.

UT hearings are different to the FTT. At the FTT you argue the facts of the case. You cannot do that at UT. If you try, you'll be told "you are just trying to reargue the facts of the case". There have to be errors in law located. These are called "grounds of appeal".

It's been known for HMRC to try and package up a bunch of complaints about facts (which would normally be an Edwards v Bairstow challenge), as an error in law - claiming the cummulative effect of them are material. It does not work - that's referred to as a "disguised attack on the findings of fact."

The appellant has to try and show that the decision contained aspects for which it was unreasonable for the FTT to conclude. There is more common law around this aspect - EvB, Degorce, Volpi, Proctor & Gamble, etc. Errors need to pass the test of materiality too, to disturb the decision made by the FTT. It's a very high bar.

When the decision comes out, you'll be able to read all this - because the judge will lay out all the law, and explain the grounds that HMRC sought to argue.

Think of it this way: The FTT is like a boxing match, with two people fighting it out. There is a referre who scores the match, and unless there is a knock out blow, it goes to points. A UT is not a rematch of the fight. It's about looking at how the judge marked the scores, and asking whehter he did it right.

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Replying to davechaplin:
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By Andy Reeves
21st Feb 2024 14:25

Happy to be corrected, but I don't think the subjudice rules apply in cases such as this.

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By cocote
17th Feb 2024 17:46

Adrian Chiles’s victory underscores the importance of understanding tax regulations and ensuring fair treatment for all parties involved.

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