IR35 and Off-Payroll Explained

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Poor legal advice cost BBC broadcaster thousands: IR35 tribunal analysis

The first IR35 judgment in seven years has resulted in a costly outcome for former BBC broadcaster Christa Ackroyd, but competent legal advice could have mitigated her situation long before her case went to tribunal.

Following appeal, Ackroyd was adjudged to be caught by IR35 at tribunal, and liable for income tax and National Insurance Contributions (NICs) amounting to more than £400,000.

“Unfortunately, she was doomed from the start,” comments Martyn Valentine, director of The Law Place. “Ackroyd unanimously fails every relevant test of employment and should have been advised to concede liability at an earlier stage, namely, right at the beginning of the inquiry.

“Instead of a legal professional, she was represented by her accountant, who made a series of errors, the first being not advising of the risks of using a limited company. Another was meeting with HMRC rather than dealing with the matter in writing. If contractors should take anything from this, it’s that legal assistance is an absolute necessity in these circumstances.”

Ackroyd’s contract screamed MOO

According to Valentine, there was never any doubt of the tribunal outcome, with the evidence provided by Ackroyd heavily outweighed by glaring factors pointing towards a significant degree of control and mutuality of obligation (MOO).

Ackroyd had entered into a contract with the BBC in May 2006 to present Look North, a regional news programme. She was engaged through her limited company, Christa Ackroyd Media (CAM) Ltd, upon the insistence of the BBC.

The tribunal reached the unanimous decision that there was MOO present between Ackroyd and the BBC. Ackroyd’s contract required her to be available to provide services for a minimum of 225 days in the year, in exchange for pre-agreed fees paid monthly.

“In any instance where the BBC stipulates a minimum amount of days’ service per year and makes payments for that time, regardless of whether work was carried out during this time, a journalist is unfortunately bound to fail IR35,” notes Valentine. “Once Ackroyd agreed to provide services on this basis, she became subject to MOO and also employed.”

Bound by the BBC Editorial Guidelines

Control was another key factor. Ackroyd was able to provide various examples whereby she exercised a degree of professional discretion, and it was agreed that when she engaged in her contract, she did so in exchange for a guarantee of “independence” and “control’.

However, the tribunal judge ruled that the BBC did have ultimate control over the work carried out by Ackroyd, despite receiving no evidence of examples where this control was exercised.

“It is down to the appellant to prove that there was no right of control and, in this case, it was an impossible ask,” says Valentine. “Ackroyd undoubtedly had a degree of autonomy, but ultimate editorial control rested with the BBC. She was required to source and present stories for a news programme, in accordance with the BBC’s Editorial Guidelines.”

The Editorial Guidelines themselves proved a crucial factor in this case. The tribunal determined that Ackroyd was bound by the BBC’s Editorial Guidelines, despite her argument that these guidelines weren’t referenced in her contract.

“The Editorial Guidelines may not have been explicitly referenced in Ackroyd’s contract, but they needn’t have been,” notes Valentine. “The BBC needed the right to impose control over Ackroyd’s work, or else Look North as a programme would feasibly run the risk of not complying with the Guidelines.”

Why was personal service dismissed as a minor factor?

Keen observers of the judgment may have noticed that the judge played down the importance of Ackroyd’s requirement to provide her personal service to the BBC. However, as Valentine points out, this case is simply an anomaly:

“You may hear discussions about substitution based on this ruling. The judge deemed it to be a factor of less importance, but that is only in this context. Whereas a contractor will typically deliver a commercial service, Ackroyd was delivering her skills, brand and image. She was the face of Look North at the time and so to provide a substitute simply wasn’t a realistic option in this instance.

“Substitution is still a very important factor. It remains enshrined in legislation, and so nobody should jump to the conclusion that any precedents will be made based on this judgment.”

Is the BBC at all to blame?

Ackroyd is just one of more than 100 BBC broadcasters who have attracted unwanted attention from HMRC whilst working through limited companies, and the omens don’t look good for other presenters taking their case to court.

“The BBC encouraged Ackroyd to use a limited company to avoid its own employment rights liability and has brought itself into disrepute in the process,” notes Valentine.

The major concern for fellow broadcasters is that Ackroyd engaged in a BBC-issued contract. Coupled with the strict editorial guidelines that presenters are required to abide by, this presents an almost undeniable argument that a significant degree of control is asserted over any broadcaster engaged by the BBC.

“Not only did the BBC suggest that Ackroyd set up as a limited company contractor, it also set her up to fail,” says Valentine. “We don’t know how many similar appeals are underway, but many appellants are probably in a similar position to Ackroyd. Unfortunately, based on this, it’s hard to see any circumstances where a broadcaster would be outside of IR35.”

Contractors – don’t expect any favours from HMRC

A key point of contention for Ackroyd was HMRC’s conduct. After describing an IR35 investigation as a “check of employer and contractor records”, the taxman arranged a meeting with Ackroyd’s accountant, who answered questions about her relationship with the BBC on her behalf. HMRC also refused to speak to her until after it had already decided that IR35 was engaged.

This led Ackroyd to accuse HMRC officers of reaching a conclusion based on inadequate information as to her role. Ackroyd also noted that she presented a list of witnesses to HMRC to interview, which it failed to do so. This conduct may appear underhanded, but as Valentine points out, this is just standard practice for HMRC:

“It does appear as though HMRC was solely collecting evidence benefitting its own case, but the taxman is entitled to assume that those under investigation are being competently advised.

“HMRC’s job is to collect what it considers to be the correct amount of tax, not to lend a hand to the taxpayer,” he concludes. “Whilst it’s the tribunal’s responsibility to make sure proceedings are conducted fairly, it is the appellant’s responsibility to mount their own case that IR35 shouldn't apply. Contractors under IR35 investigation can’t expect any favours from HMRC.”

Published: 16 February 2018

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IR35 and Off-Payroll Explained