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Kaye Adams Loose Women ITV
ITV

IR35: Kaye Adams wins marathon fight with HMRC

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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?  

1st Dec 2023
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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.

FTT decision  

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.      

Heavy burden

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.”

Replies (33)

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By More unearned luck
01st Dec 2023 13:51

Can you post a link to the latest decision please.

"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.” Is a damning indictment of IR35 and the differences in taxes between employment and SE. We need a sensible tax code.

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By Justin Bryant
01st Dec 2023 14:04

This is the problem of fighting the state in its courts with their unlimited resources. It's inequality of arms. Look at the recent Fisher SC case also, where the taxpayer won, but only after a huge, very painful, long-drawn-out ordeal for them.
https://www.templetax.com/news/1116/atholl-house-productions-limited-and...

The (remitted) FTT decision is perhaps unsurprising re my previous Autoclenz comments here, although it was finely balanced per the judge (para 161).
https://www.accountingweb.co.uk/any-answers/interesting-ir35-case-0
https://www.accountingweb.co.uk/tax/business-tax/court-of-appeal-toys-wi...
https://www.accountingweb.co.uk/any-answers/disagreement-with-employer-r...

What a mess! Maybe it will bounce back up to CoA and then up to SC who will then be able enlighten us all on how IR35 actually works!

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Replying to Justin Bryant:
the sea otter
By memyself-eye
01st Dec 2023 18:11

IR35 doesn't work!
We all know this.
The dividend tax should have buried this nonsense for good, although the rationale for IR35 was always suspect.
In - out? in - out?..... shake it all about -that's what IR35 amounts to, a random lottery of circumstances
Probably the most stupid, pointless, unworkable, costly piece of tax interpretation ever foisted on unwitting 'customers'

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Replying to memyself-eye:
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By Justin Bryant
02nd Dec 2023 08:16

Yes. My point was that unless the SC changes things (so that it's less uncertain), the reason it's an unworkable mess in practice is explained by me here (as well as in the latest above case of course): https://www.accountingweb.co.uk/any-answers/latest-ir35-taxpayer-win

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Replying to memyself-eye:
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By johnjenkins
04th Dec 2023 12:10

Spot on. Employment status should be governed by workforce not HMRC.

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By Alison Cotton
04th Dec 2023 09:33

One of the things that disgusts me about this process is that Kaye Adams has had to pay court fees as a result of a HMRC appeal in 2022, where the previous Tribunal is judged to have made "errors". Surely the Court or tribunal that made the "errors" should be paying these fees and all associated legal costs.

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By norstar
04th Dec 2023 09:41

Yet we hear that Deliveroo, Ubereats etc are using a workforce of "self employed" delivery drivers who in turn, use self employed asylum seekers, with impunity.

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By 2TunTed
04th Dec 2023 09:58

For most professionals, IR35 has never been anything but a construct to maintain the PAYE take as business practices have changed. Most of us preferred it when tax liability was determined by facts and not by some fictitious nonsense dreamed up in the treasury/HMRC.
As for putting the nonsense through a court of law in the vain hope that the FTT and UTT might be able to make more sense of it than the tax titans who dreamt it up is farcical.
As anyone who has had the misfortune to have to resort to the courts will know, all legal victories are actually losses. Even if you prevail, you will only recover a percentage of your costs so even if you are proved right you will still be substantially out of pocket. Profound sympathies with Kaye Adams who has now found this out with all the angst and stress that goes with it.

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By Mike Warburton
04th Dec 2023 10:02

The taxpayers Charter, now supported in statute by the Finance Act 2009, requires HMRC to work within the law to ensure everyone pays the right amount of tax and to help taxpayers reach an appropriate outcome quickly and simply.
So why is it that HMRC has expressed “disappointment” at the result, as it has done on other cases where it has lost. It is job of HMRC to be neither pleased nor disappointed with a court decision. It is the job of HMRC to operate within the charter to ensure that taxpayers pay the right amount of tax by law.
The proper response to this decision should be to thank the judges for explaining the rules for them so thoroughly followed by an apology to Kaye and an offer to pay full compensation. That will not happen sadly. I am just hoping that HMRC does not attempt to start off the merry go round again with yet another appeal. What we need is a Taxpayers Bill of Rights to prevent this one sided nightmare.

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Replying to Mike Warburton:
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By Justin Bryant
04th Dec 2023 10:11

It's simply because, as everyone knows full well, HMRC are very bad losers (especially on IR35 cases)! They very rarely gracefully accept defeat or that they're wrong (on anything), if ever. Just look at their massive lies re the 2019 LC fiasco.

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Replying to Justin Bryant:
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By Justin Bryant
04th Dec 2023 11:56

Here's a rare example of HMRC conceding defeat at the tax tribunal and acting accordingly (re NICs on cars): https://www.gov.uk/government/publications/agent-update-issue-114/issue-...

The HMRC people in charge of IR35 seem unable to do similar.

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Replying to Justin Bryant:
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By Mike Warburton
04th Dec 2023 12:31

I agree. I have just filed an article for the Daily Telegraph on line edition tomorrow essentially arguing this bad looser point.
Mike

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Replying to Mike Warburton:
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By Justin Bryant
04th Dec 2023 13:22

Noted with thanks Mike but do please check your spelling for DT!

It seems HMRC have a policy of not accepting they're wrong on so-called disguised remuneration of any kind (so much so that they are happy to make up facts and lie when it suits them to defend their indefensible position, let alone change the law 20 years retrospectively).

I can't think of a single occasion that HMRC accepted they were wrong about that and they have no regard for people's suffering over their bad legislation, as in this case and 2019 LC.

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Replying to Mike Warburton:
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By rmillaree
04th Dec 2023 10:51

good point - someone should independtly look at hmrc's conduct in this case and they should be held to account if they have gone out of their to not understand the fundamental principles here - even worse if they wont face the fact that presumably they always fought a battle that should notn have been faught.

The hmrc spokseperson heer should specifically be held to acount for what they are saying.

Cant get much clearer case of hmrc needing to be taken to task.

I do sometimes understand that they wont agree with a dedcision - but on what has always been clearly a bordeline case they should knoew exactly the same at that outset that individual worker knows - eitehr case should be sketchy and if you lose well that shouldnt really be a surprise. shame on hmrc if they wont accept a tonking when they have been handed one out.

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Replying to rmillaree:
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By richard thomas
04th Dec 2023 16:21

I fully agree with Mike Warburton, but you are wrong in presuming "they always fought a battle that should not have been fought". Note what Rebecca says in reporting that the FTT said their revised decision "was very finely balanced".

If HMRC fights a hopeless case then the FTT can (and does - I did it myself on several occasions) award costs to the taxpayer.

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Replying to richard thomas:
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By rmillaree
04th Dec 2023 17:34

i guess we may have to disagree - there is plenty of borderline cases. IMHO if they have clearly lost at ftt and their case is sketchy at best - then imho they should not be taking that case further it serves very little purpose and it makes themselves look like complete fools whne they proceed as they have done.

They should really be targetting their IR35 battles more carefully where its reasonably clear their prospect of winning on appeal is much higher significantly over the 50% threshold imho - and worst of all its their clueless peeps making the choice to carry on here so there seems to be some hmrc bods who seem to ignore the fact they probably have a losing case.

Others may see if different and that if they take 50 cases on and win 1 that serves a purpose - imho thats complete horlocks to me.

To me every person needs to present their case and where hmrc are beaten even if that is by a smidgen they shoudl accept facts rather than bring builly boy tactics to bear in the hope they can bully taxpayer into submission or get a "lucky result" which will probably only happen due to them having unlimited firepower so to speak or by the fact if you get 3 bites at the cherry and only have a 25% chance of success there is over 50% chance that 1 of the 3 peeps will rule in their favour.

The fact they can doesnt ever mean tey shoud.

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Replying to rmillaree:
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By Justin Bryant
05th Dec 2023 09:06

RT is right, but you can't blame HMRC when (in my view at least) many judges are biased (perhaps unconsciously) in HMRC's favour (and HMRC know that) and very, few judges, if any, are biased in favour of taxpayers.

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Replying to Justin Bryant:
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By rmillaree
05th Dec 2023 09:56

but you can't blame HMRC when (in my view at least) many judges are biased (perhaps unconsciously) in HMRC's favour (and HMRC know that) and very, few judges, if any, are biased in favour of taxpayers.

the fact you can does not make it right or proper - imho. Particualrly if it is builly boy tactics being used to win rather than winning on the rules. Lets be clear here they could change the rules if they wanted a different outcome.

We will all have different viewpoints as to what is right and proper though so i dont expect anyone else to agree with my biased viewpoint here - mine is coming from position of what looks fair to everyone - we all know life aint fair though.

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Replying to rmillaree:
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By Justin Bryant
05th Dec 2023 10:27

But you should perhaps instead blame the judges for being biased in the 1st place (not the judge in this case I hasten to add, who is highly respected and experienced).

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Replying to Justin Bryant:
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By rmillaree
05th Dec 2023 11:00

perhaps i should - but if this is case that hmrc clearly should not have won then i will insist in blaming hmrc for using bully boy tactics knowing that any win would not come through fair means - i wil uphold hmrcto following the morals of the taxpayers charter and give them no leeway if they dont

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By SimonLever
04th Dec 2023 10:03

"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:

...

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)"

So does that mean that HMRC will have to now amend the CEST tool to take this into account?

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Replying to SimonLever:
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By dstickl
04th Dec 2023 13:04

Well now, Simon, I really do think that HMRC and the court/s etc has pulled a fast one on self-employed-workers with their [weasel?] words of "... there is a mutuality of obligation between the worker to supply services and the engager to pay (MOO test)".
REASONING:
(A)- MOO means Mutuality Of Obligation.
(B)- In any credible commercial contract the engager of the self-employed-worker/s has a certain COMMERCIAL obligation to pay for the then "present-time contract" specified specific services provided by the self-employed-worker/s under a specific written contract, rather an uncertain MUTUAL obligation of continuity based on "understanding/s and/or usages", possibly based on "trust", built up from a social reputation etc over a very long period of time.
(C)- On the contrary, an unwritten and uncertain MUTUAL obligation of (MOO) self-employed-worker/s based on alleged vague verbal "understanding/s and/or usages" cannot have any credible place, particularly regarding the actual provision of services actually specified in a written commercial actual contract.
(D)- In my opinion, unless a "present-time" written contract specifically has written clause/s that sets out the uncertain hope/possibility of continuity of employment of self-employed-worker/s in the future in a "future-time" contract, after the end of a "present-time" written contract, then there cannot be any mutuality of obligation between the worker to supply services and the engager to pay (MOO test) whatsoever.
QUESTION to Simon:
Do you - or do you not - agree with my reasoning set out above, please?

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Replying to dstickl:
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By SimonLever
04th Dec 2023 13:42

Hello dstickl

It is not my place to argue what Mutuality of Obligation (MOO) is. This has been discussed many times on this forum and I do not feel the need to add to the various arguments.

My point was that the CEST tool notoriously ignores MOO when making its decisions. Having a FTT now instruct HMRC to consider MOO when making IR35 decisions does this mean that the CEST tool would no longer be fit for purpose if relied upon by HMRC in tribunals. If the tool indicates employment, is the contractor or engager entitled to ignore it as MOO is not considered.

I appreciate that it is only a FTT decision and therefore not legally binding but until the point is considered by a higher authority will HMRC find it difficult to say that a contractor/engager has to rely on the CEST result as it is clearly flawed.

Previously this was known but not stated in any case law (as far as I am aware of, happy to be corrected). Now it is specifically mentioned which gives contractors/engagers the opportunity to legitimately challenge the CEST outcome.

Will HMRC now have to update or modify the CEST tool to include MOO?

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By MartinLevin
04th Dec 2023 10:13

"Dave Chaplin, CEO of IR35 Shield, who has been supporting Adams since 2019, estimates that HMRC has spent around £250,000 on this case."

That sums up the wastage in the public sector.

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By AndrewV12
04th Dec 2023 13:07

Well done Kaye Adams, but HMRC don't lose many cases theses days.

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Replying to AndrewV12:
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By johnjenkins
04th Dec 2023 14:26

If the worker and work giver stick to the "contract for services", HMRC will always lose.
The only way they can win is if they prove a "hypothetical contract" whereby the signed "contract for services" is not adhered to.

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By tonyaustin
04th Dec 2023 17:07

The fundamental problem is not the IR35 legislation. The purpose of that is to put a contractor and HMRC on an equal footing regarding being an employee or self-employed, since PAYE cannot be operated when paying a limited company for a contractor's services. If Kaye Adams (or others) had contracted directly with the BBC on the same terms, would the BBC have operated PAYE when paying her and would she have fought it? If the BBC had paid her gross and HMRC had determined her an employee, then the BBC would have been considered by HMRC to be liable for the income tax and NIC that they failed to deduct, as well as employer's NIC. A company was better for KA even if self-employed because of the difference in tax rates and no NIC on dividends. If the Government changed the way private company director shareholders were taxed, many contractors would want to be employees but their clients would not want to be responsible for employment rights and benefits.

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Replying to tonyaustin:
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By johnjenkins
05th Dec 2023 09:23

The fundamental problem, Tony, is IR35 in principal. Employment status is a commercial decision and HMRC shouldn't even consider challenging it.
IR35 was Gordon Browns way of destroying the small business and to pay for his own ....ups.
Who dreamt up "hypathetical contracts" I've spelt it right, or "disguised remuneration". MTDQU would have been the last straw for the small business. Yet Government and HMRC keep denying it. There will be many more of these moronic cases.

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Replying to tonyaustin:
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By Justin Bryant
06th Dec 2023 09:52
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By jbtacks
04th Dec 2023 18:35

'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.'

Surely those costs were valid to date. Was this a UT finding ? Smacks of pressure from above to me.

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By Kemu
05th Dec 2023 16:40

Sadly Kaye Adams has probably not yet won this 'marathon fight'. She has (mostly) won 5 rounds - though the awarding and reversing of costs seems bizarre and daunting. That ought to be enough. Have HMRC announced they are giving up? I didn't read that anywhere... Where's the referee???

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Replying to Kemu:
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By richard thomas
05th Dec 2023 17:02

I think it is unlikely that HMRC will appeal, very unlikely that Tony Beare will give PTA and, after the spanking they got from the CofA, very unlikely that if they get permission from FTT or UT that the UT would dare overturn Tony's excellent judgment. It would in my view be a Bairstow v Edwards appeal. Bear in mind the CofA basically said FTT was right, except for not dealing with two points. It has now dealt with the points in a way that makes the decision pretty bulletproof.

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Replying to richard thomas:
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By Justin Bryant
06th Dec 2023 12:31
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