TV presenter Adrian Chiles loses IR35 case
By Justine Riccomini, Head of Tax (Employment and Devolved Taxes)
5 July 2024
We explain how HMRC won their case on off-payroll working against Radio 5 Live host, Adrian Chiles.
The latest television presenter’s case relating to IR35 reached a conclusion in the Upper Tribunal (UT), when a decision was issued on 7 June 2024. The case in question is between Basic Broadcasting Ltd, a personal service company owned by Adrian Chiles, and HMRC. It concerns whether the work carried out by Mr Chiles over a five-year period under two ITV and three BBC contracts (as well as some other work elsewhere) was within the boundaries of the intermediaries legislation provisions at Chapter 8 of ITEPA 2003.
Somewhat frustratingly, the UT didn’t feel able to decide the case as part of its judgment, but instead, passed it back to the First Tier Tribunal (FTT). This gives the FTT the opportunity to reconsider its original decision, which the UT deemed to err in law when considering to what extent Mr Chiles had been working independently of his various engagers. Assuming the FTT’s final decision aligns with the UT, Mr Chiles faces a tax and NICs bill of around £1.7m.
Methodology
The Court of Appeal decision in the 2022 Kickabout case sets out the requirement to apply the ‘three stage’ process to the hypothetical contract between the worker and engager when determining if a contact of employment exists. It’s vital that agents understand this process if they are to successfully defend clients against HMRC.
- First, determine the actual contractual arrangements between the parties (these may be different to those on paper);
- Second, determine the actual terms of the hypothetical (constructed by the court) contract between the parties, based on the fact pattern;
- Third, determine what the hypothetical contract tell us. Is the individual working under an employment contract, or a contract for services (self-employed)?
Back to Ready Mixed Concrete, Atholl House and PGMOL
Upon reaching the third stage, the judiciary must turn back to the Ready Mixed Concrete case to look at the three stage test in that case. This test is the accepted method of working out whether mutuality of obligation exists, how much control there was and how extensively the individual could be said to be in business “of their own account”. These two latter principles are now largely governed by the approach taken in the Atholl House case, while the long-awaited Supreme Court decision in the case of Professional Game Match Officials Ltd (PGMOL) holds up other decisions about exactly to decipher whether Mutuality of Obligation (a difficult concept for many taxpayers and agents to understand), is in play. Hopefully the decision, once issued, will not be vague on this and will assist tax advisers and HMRC in a clearer way forward.
The human cost
It is evident that Mr Chiles has suffered a great deal of stress over the years that this case has been ongoing. The UT clearly recognised this in their decision: “…Presented with this moving target, taxpayers and their advisers must nevertheless grapple with whether the legislation applies to any particular engagement, and the courts and tribunals must do the same. However, it should not be forgotten that behind every personal service company is a person, and, as we have seen in this case, the uncertainty and financial exposures generated by the difficulty in establishing a clear and stable legal position continue to produce a very real human cost.”
Conclusion
It’s becoming increasingly clear that the issue of employment status needs to be revisited, and that the large volume of case law on the subject is doing nothing to simplify the process of deciding whether a person is employed or self employed for tax purposes. It seems now may be the right time to put matters on a statutory footing, and start again.
ICAS is working with other professional and representative bodies to try and effect this change. It is not going to be a quick or an easy process, but it’s definitely time to start searching for the right answers to this long-standing, complex issue.
