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IR35: Christa Ackroyd loses again

Ackroyd was the first IR35 case HMRC won involving BBC presenters. She has now lost her appeal at the upper tribunal that concentrated on the issue of control.

28th Oct 2019
Tax Writer Taxwriter Ltd
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There have been five cases heard at first tier tribunal (FTT) involving seven TV or radio presenters: Christa Ackroyd, Lorraine Kelly, Kaye Adams, Paul Hawksbee, and Joanna Gosling, David Eades and Tim Willcox.

Christa Ackroyd appealed to the upper tribunal (UT) on the grounds that the FTT misinterpreted the law when it concluded that the BBC had sufficient control over her actions such that the relationship should be one of employee and employer.

Facts

In 2001, Ackroyd was approached by the BBC to front its Look North programme as the viewing figures were lagging behind those of its ITV rival. At that time, Ackroyd was co-presenting a daily news digest programme for Yorkshire Television.

However, the BBC did not want to take on Ackroyd as an employee and suggested that she work through a personal service company. In response, Ackroyd set up Christa Ackroyd Media Ltd (CAM) and the contract with the BBC was signed on behalf of CAM in May 2001.

There was no agency involved in the chain, so there were only two written contracts to examine: between CAM and Ackroyd, and CAM and the BBC. 

Three issues  

In order to determine whether a hypothetical contract between Ackroyd (the individual worker) and the BBC (the engager) would be one of service, as exists between an employee and employer, the FTT examined three broad conditions:

  1. Mutuality of obligation between the parties to provide and perform the work
  2. Control by the engager over the worker
  3. Whether indicators of self-employment existed

Mutuality of obligation   

The FTT decided that there was a mutuality of obligation between the parties, and this point was not part of the appeal to the UT.

Self-employment indicators

The FTT also concluded that the attributes of the hypothetical contract were largely consistent with an employed status for Ackroyd. This part of the decision was not appealed to the UT.

Control is key 

The condition of right of control looks at whether the engager can determine where, when, and how a task is to be done. The FTT had to weigh up evidence regarding control over the different factors of Ackroyd’s work from the BBC programme editor, BBC editorial guidelines, the written contract with CAM, Ackroyd’s accountant and Ackroyd herself.  

At the UT, Ackroyd’s barrister argued that it was wrong to insert control as an implied term into the hypothetical contract. Also that there was no framework of control for Ackroyd, such as a BBC line manager or appraisal system, and there were no effective sanctions which the BBC could apply to Ackroyd to enforce control.

The UT rejected these arguments, mainly based on Ackroyd’s evidence to the FTT.

The FTT didn’t believe Ackroyd’s assertions that she had “day-to-day control” over her work and “led the team in the sense of control and decision-making”. The FTT refused to accept that Ackroyd had the final say on issues relating to Look North or her work on the programme. The FTT also concluded that the editor of Look North, on behalf of the BBC, had the ultimate right to decide what stories were covered and in what order.

Taking all of these aspects together and the fact that the contract between the BBC and CAM was for seven years, the UT concluded that the FTT did not make an error that the hypothetical contract contained sufficient control by the BBC over the provision of services by Ackroyd. 

Commentary

Commenting on the upper tribunal verdict Dave Chaplin, CEO of contractor resource site ContractorCalculator said: “What’s really frustrating about this case is that it was decided on the pre-reformed off-payroll rules. This means that the freelancer, in this case, Ackroyd, is deemed liable for employer’s national insurance which under the off-payroll rules would rightfully be paid by the BBC.

“Had Ackroyd’s status been assessed under these the new rules which have applied from April 2017 for public sector contracts such as with the BBC,” continued Chaplin, “she would not have an extra tax bill, and it would be the BBC picking up the bill for the perceived avoidance of the employment taxes.”

Seb Maley, CEO of Qdos, commented: “This case is not a typical IR35 case, given contractors aren’t usually pushed into working arrangements purely for the benefit of the client, despite the emerging trend in the banking sector.” 

However, Maley noted that Ackroyd’s case “also reflects the complexities of the IR35 legislation and that making an IR35 decision without the help of a specialist is a risk, particularly when taking into account the cost of getting things wrong.”

Replies (14)

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By Justin Bryant
30th Oct 2019 10:20

I was always surprised why anyone thought the original decision was wrong. The UT decision actually shows the FTT were if anything wrong in being overly generous to the taxpayer in thinking there was a higher hurdle of a formal implied term requirement re control (which there isn't of course under IR35 as the UT noted). The taxpayer will now be nursing a pretty big and totally avoidable and unnecessary cost bill.

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Replying to Justin Bryant:
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By C Graham
30th Oct 2019 10:49

But if a hypothetical employment contract exists then the hypothetical employee should be able to claim back pay into workplace pension, backpaid holiday, any smp, any sickness pay.

I just do not understand how if a situation of employee/employer is judged to exist that the employee cannot assert their rights equal to other employees.

IR35 stinks as an idea because there are many situations that companies do not want cost and hassle of employer obligations to their workforce and yet under IR35 almost always it is the small self employed contractor that takes the hit, not the large corporations like the BBC.

Those contractors also want the freedom to work without being tied into annual leave restrictions, company rules and hierarchy and want to be free to take on work and do contract deals with whoever they choose. Hmm does this sound vaguely familiar at present !

Get rid of IR35 because today's companies and contractors need fluidity and flexibility.

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Replying to C Graham:
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By Justin Bryant
30th Oct 2019 11:40

I'm not disagreeing with you, but what you say is beside my point re many so-called IR35 experts claiming the FTT decision was wrong (for various nonsense reasons e.g. likening her job re control to that of an opera singer - which is just a totally ridiculous analogy).

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Replying to C Graham:
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By PMS
30th Oct 2019 11:43

C Graham, the answer is implicit in your first two paragraphs. The "employee" cannot assert rights equal to other employees, because an employee/employer relationship does not exist. It is simply a hypothetical employment contract, not an actual employment contract, and it is presumed to exist only for the purposes of IR35 and not for the purposes of employment law or for any other purposes.

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Replying to PMS:
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By Rgab1947
30th Oct 2019 11:51

And that is why IR35 is flawed, wrong, unfair.

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Replying to Rgab1947:
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By mkowl
30th Oct 2019 12:07

As I have said below the issue I have is that she was basically forced to provide her services via this type of arrangement and the BBC have been able to wash their hands of all obligations. I am sure she happily did this because of the net income benefit she could obtain but the BBC have saved much more. Compare to my largest client that uses a lot of ltd co subcontractors but most of those seem more than happy to trade the loss of pension, holiday and rights to earn £10k to £15k per month net of VAT. The alternative would be on payroll at perhaps £8k per month. So when you work all this out I reckon in this case HMRC will receive less tax revenues under the new rules from April 2020 than they currently do and all parties could be in a more inflexible arrangement

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Replying to C Graham:
By tonyaustin
30th Oct 2019 13:44

Christa Ackroyd was employed by her psc but drew little or no salary, choosing to take dividends instead. If you are a director of your own company, you have to finance your employment rights out of the company's income. Therefore you should charge more than an employee would be paid to cover those costs. Had she worked directly for the BBC under the same terms, she would have been an employee, the BBC would have paid employer's NIC but she would probably have been paid less as a result. Alternatively, she could have insisted a contract for her services outside IR35. PSC's can be used to circumvent the PAYE regs and IR35 is written to prevent that happening.

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By C Graham
30th Oct 2019 10:22

'However, the BBC did not want to take on Ackroyd as an employee and suggested that she work through a personal service company'

Why - because she would have been entitled to employee rights, holiday pay, sick pay, protected by employment law - could have put a claim for unequal pay compared to others doing the same job etc etc etc Not to mention the Emp/er nic

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Replying to C Graham:
By tonyaustin
30th Oct 2019 13:48

...so therefore she should have insisted on a higher fee to compensate! Or the BBC paid her more than if she had been an employee in order to compensate. Either way, whether she negotiated or not, she took what was finally offered. It's generally called supply and demand!

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By mkowl
30th Oct 2019 10:51

Like others the fact the BBC pushed into that type of arrangement and then washed their hands of her is the bigger story. You do wonder whether she does have a retrospective claim against the BBC to be deemed a worker and recover back some of those benefits

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By 0705736
30th Oct 2019 12:57

It's ridiculous to argue that anyone in her position isn't in reality an employee. Why should contractors and their employers be treated more favourably than ordinary employees and their employers? Contractors receive high salaries which more than compensate for their having to pay secondary (employer's) NIC and giving up various employment rights. They need to either deal with matters properly from the start or put money aside in case the **** hits the fan, as in this case. And obviously they need to get expert advice on the tax position - perhaps she should explore the possibility of a claim against her accountant?

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Replying to 0705736:
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By Kevinb69
30th Oct 2019 13:07

That is rubbish - a lot of contractors end up with no more than they would have got as an employee, and certainly not enough to compensate for lost employment rights. 'Employers' want people to be contractors because it has, in the past, reduced their exposure to costs and saved them the secondary NIC, to believe that they are happily passing the additional 13.8% to the 'deemed employee' is, at least in my experience completely wrong.

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Replying to Kevinb69:
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By C Graham
30th Oct 2019 18:37

Agree Kevin69 because contractors have no job security, get no employee benefits and have to factor in times when they are between contracts - plus many will have to appoint accountants and take out PI to cover themselves.

They get no sick pay or maternity or spp.

There are a lot of overheads and when they have to take responsibility for their own businesses, filing accounts, complying with Comapanies House rules - why shouldn't they take back some of the benefits of that too.

The key word in the legal case is 'hypothetical' which in dictionary terms means fictional, supposed, imagined but not necessarily real or true. Therefore it is astonishing that something described as a hypothetical situation is then treated as a real one yet fails to pass the normal tests of employment which is where employment law can be applied (ie in terms of employee rights)

I wonder how Capita, Accenture et al will work if their contractors all have to pass the test of 'control' etc.

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By AndrewV12
11th Nov 2019 12:31

HMRc are like a dog with a bone regarding IR35, on another matter, a self employed coach driver I know (trades as a sole trader not a Ltd Co) was told by his boss he had to classified as Paye as IR35 rules dictated so.

MMMm i think he is barking up the wrong tree or is he.

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