IR35: Kaye Adams wins marathon fight with HMRCby
In three out of four court hearings held over five years, Adams’ contracts with the BBC were judged to be outside of IR35, so why did this dispute take so long to resolve?
Kaye Adams has worked as a freelance journalist and author for over 20 years, appearing on a wide variety of TV and radio programmes. She is one of the presenters on the ITV daytime show Loose Women, but this dispute only concerns her contracts with the BBC for shows on Radio Scotland.
How it began
In July 2014, HMRC opened enquiries into Adams’ personal service company Atholl House Productions Ltd. The correspondence dragged on and the taxpayer appealed to the first tier tribunal (FTT) in March 2018 to resolve the issue covering the tax years: 2013/14 to 2016/17.
Just before the FTT hearing (TC07088), HMRC conceded the first two tax years, leaving the tribunal to consider the tax and NIC due for 2015/16 and 2016/17 which totalled £124,441.58. If HMRC had won this case there would have also been interest and penalties to pay on top of that.
The FTT found in favour of the taxpayer as I reported in April 2019 but both sides had to pay their own costs. Adams’ business insurance cover ran out after this hearing.
Escalation to upper tribunal
HMRC was permitted to appeal to the upper tribunal (UT), claiming the FTT had made errors in law. The UT indeed discovered that some mistakes had been made in the FTT reasoning but it also found in favour of the taxpayer.
HMRC was ordered to pay the taxpayer’s costs of £61,000 but argued about the amount and finally offered only £45,000. Adams accepted this offer due to the costs of fighting the point.
Court of Appeal
HMRC would not give up and took the case up to the Court of Appeal.
The Atholl House Productions case was heard alongside that of Kickabout Productions (the service company for TalkSport radio host Paul Hawksbee). Rebecca Seeley Harris explained how the court distinguished the two cases and apparently redefined the IR35 tests slightly.
That Court of Appeal agreed some errors had been made in the decisions up to this point and sent the case back to be reheard at the UT.
In June 2022, the UT decided the case should be remitted back to the FTT to be heard by the same panel of judges, with permission for further facts to be found and further evidence to be allowed.
Adams had to pay her own and HMRC’s costs and repay £45,000 which HMRC had paid her after the UT hearing.
Full circle to FTT
The FTT judgment reproduces much of the conclusions of the previous three hearings and carefully sets out the mechanism the courts should follow to decide such IR35 cases.
Those stages are:
1. Consider any actual written contracts.
2. Consider the hypothetical contracts between the engager and the worker.
3. Apply the tests which determine that an employment contract (inside IR35) exists if:
- 3A: The worker provides personal service and there is a mutuality of obligation between the worker to supply services and the engager to pay (MOO test)
- 3B: The worker agrees she is subject to the control of the engager (control test)
- 3C: The other provisions of the hypothetical contract are consistent with being employed.
Conclusions in stages 1, 2, 3A and 3B had been determined by the higher courts and HMRC’s barrister argued that the FTT should not revisit those stages. However, the FTT decided it could revisit stages 1 and 2 but only so far as those conclusions shape the thinking in stage 3C.
Many components of stage 3C make up the relationship between the parties and the surrounding circumstances. For example, did the BBC managers view Adams as self-employed and what was the custom and practice of the industry at that time for presenters in her position? The FTT was able to receive new evidence on those points from the head of radio at BBC Scotland, a senior legal and business affairs manager at BBC, and the 2008 Radio Industry Guidelines.
The FTT considered the terms of the hypothetical contract which are indicative of self-employment such as the absence of employment rights, and those that are indicative of employment, such as the requirement to attend editorial training. It also tried to weigh those issues and look at the full picture.
But the FTT went further to consider the circumstances in which the hypothetical contracts would have arisen: essentially, who knew what at the time the written contracts in stage 1 were executed?
When those attendant circumstances are laid on top of the terms of the contract, the FTT found more factors that pointed towards self-employment than employment, but it was very finely balanced.
HMRC has 56 days from the release of the FTT judgment on 29 November 2023 to seek permission to appeal or accept the decision.
Although the disputed tax and NIC bill was £124,000, the amount that would be payable after taking into account taxes already paid by Adams would be in the region of £70,000. Adams has spent much more than that defending her case. Dave Chaplin, CEO of IR35 Shield, who has been supporting Adams since 2019, estimates that HMRC has spent around £250,000 on this case.
A statement from Adams following the result said: “I am delighted that the first tier tribunal has confirmed my self-employed status for the third time, but there is no jubilation for me in this result. Over the nine years of this investigation, the mental stress has been close to unbearable at times, and the legal costs I have incurred far outweigh the tax at stake.”