Remote control?
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
9 March 2021
Justine Riccomini summarises the latest employment status case decision and asks when this perennial thorny area will ever be simplified.
The recent decision in Atholl House (Upper Tribunal) has provided more food for thought on the subject of employment status generally, as it applies to IR35 cases, and beyond.
Atholl House Productions Limited
The case concerns the work undertaken by BBC presenter Kaye Adams and relates to whether the provision of services through her personal services company “Atholl House Productions Limited” amounted to a deemed employment or not. The Upper Tribunal found for the taxpayer and deemed the intermediaries legislation did not apply.
Background
During the years 2015/16 and 2016/17, Ms Adams presented a BBC radio show – “The Kaye Adams Programme”. The written contracts presented an agreement with Atholl House Productions Ltd under which Ms Adams would present a minimum 160 programmes per term, the term usually being a one-year period on a rolling basis.
The fee for each period was a minimum £155,000 and any additional programmes delivered over and above the minimum 160 would incur a fee of £968.75 each. Ms Adams was not required to work exclusively for the BBC.
Mutuality and Control
The main considerations examined during this hearing and in the subsequent decision were control and mutuality of obligation. During the UT’s examination of the hypothetical contract, which is the process by which IR35 cases are to be analysed to enable differentiation between the stated intention of the parties and the true intention of the parties, mutuality of obligation would have won the case for HMRC, yet Ms Adams was deemed to be under insufficient control by the BBC to enable the UT to classify her as an employee.
The UT agreed with the First Tier Tribunal that mutuality was sufficiently present to qualify as a contract of employment in part (i) of the Ready Mixed Concrete test, as set out by MacKenna J – see the underlined passage below:
“A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.”
However, the UT did not agree with the findings of the FTT in terms of part (ii) of the test because Ms Adams undertook a significant amount of other freelance work while she was providing her services to the BBC to be in business on her own account – which was a key criterion for self-employment set out in Hall v Lorimer [1994] 1 WLR 209. The main reason the UT upheld Ms Adam’s argument was that she had evidence to support the fact that she has been a freelance services supplier to a number of different broadcasting entities for the greater part of her career.
Basis for the decision
Whilst it was acknowledged that the BBC officially had the right to determine the form and content of each show, Ms Adams was able to demonstrate that she enjoyed sufficient autonomy by deciding on the content and direction of the shows as they happened due to her “proven track record” in these matters.
Overall, the absence of control superseded the presence of mutuality of obligation – which was the correct approach, because mutuality of obligation should be the last thing which is examined when all else fails to establish whether there is an irreducible minimum of obligation to confer the existence of an employment contract. The UT upheld the decision of the FTT that IR35 did not apply in this case.
HMRC stated that they will “carefully consider the outcome of the tribunal before deciding whether or not to appeal.’
The whole picture
It is important for anyone examining employment status to ensure they have the full facts and are able to determine the true intention of the parties to the contract rather than taking the written contract at face value. It is also important to be mindful of the fact that whilst HMRC’s CEST tool is there as a guide to employment status, HMRC freely admits that it does not address the concept of mutuality of obligation – which many tax experts consider to be a flawed standpoint because the concept is still examined in the vast majority of employment status cases in both the Employment Tribunal and the Tax Tribunal.
In this particular case, the degree of control which Kaye Adams has over the programmes swung the argument heavily in her favour – which, had the hypothetical contract not been examined may have been missed, because the written contracts led the reader to believe that it exercised a much stricter degree of control over Ms Adams than happened in reality.
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