Basic Broadcasting Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 February 2022 |
| Neutral Citation | [2022] UKFTT 48 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2022] UKFTT 48 (TC)
Judge Jonathan Cannan, Mr John Woodman
James Rivett QC and Quinlan Windle instructed by Clintons LLP appeared for the appellant
Adam Tolley QC and Marianne Tutin instructed by HM Revenue & Customs Solicitor's Office and Legal Services appeared for the respondents
Income tax and National Insurance – Intermediaries legislation – IR35 – ITEPA 2003, s. 48–61 – Personal service company – Hypothetical contracts – Whether contracts for service or contracts of employment – Appeal allowed.
The First-tier Tribunal (FTT) found that hypothetical contracts between the presenter Adrian Chiles and both the BBC and ITV were contracts for services and that intermediaries legislation (IR35) did not apply.
Adrian Chiles is a well known TV and radio presenter, who worked at various times during the period under appeal for the BBC and ITV (sometimes concurrently) through his own personal service company, Basic Broadcasting Ltd (BBL). HMRC raised assessments against BBL in respect of PAYE and NICs spanning the tax years 2012–13 to 2016–17 amounting to just over £1.7m in total. The assessments were raised on the basis that the BBC and ITV contracts fell within the intermediaries legislation (IR35) because the work performed by Adrian Chiles was, or would have been but for the presence of the intermediate company (BBL), performed under contracts of service and was effectively employment.
BBL appealed on the grounds that the work was performed under contracts for services and would have been self-employment, had the intermediate company not been present.
The “intermediaries legislation” was, for the years under appeal, contained within sections 48–61 of the Income Tax (Earnings and Pensions) Act 2003 and equivalent provisions in the Social Security Contributions (Intermediaries) Regulations 2000. This legislation required the intermediary (BBL in this case) to consider the nature of the hypothetical contract between the worker, Mr Chiles, and the end client (BBC and ITV) and ask:
If the limited company (or other intermediate) did not exist, would the relationship between the end client and the worker be that of employer and employee?
If that relationship would have been employment, the intermediate company was responsible for operating PAYE and NICs on the “deemed” employment payments arising from the contract. If the relationship would have been self-employment, PAYE and NICs would not need to be applied.
The FTT considered the three-stage test derived from Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [2010] BTC 49 under which:
A contract of service exists if these three conditions are fulfilled:
- 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.
- He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in sufficient degree to make that other master.
- The other provisions of the contract are consistent with its being a contract of service.
The first two tests must be satisfied for employment to exist. If they are satisfied, employment is automatically presumed unless, under the third test, the other factors of the engagement are sufficiently inconsistent with employment to outweigh the presumption – which is essentially what the FTT decided in this case.
The FTT found that there was a mutuality of obligations (the first test) in each of the contracts. Mr Chiles was required to give personal service and could not engage substitutes, but more importantly was required to perform the work if asked and was entitled to be paid if even if he was not so asked.
The FTT also found that there was sufficient framework of control (second test). Although there was no “granular mechanics of control” as cited in Christa Ackroyd Media Ltd v R & C Commrs [2019] BTC 526, in the sense that whilst on air Mr Chiles was clearly not controlled “in the moment of performance”, the BBC and ITV had final editorial control and could require him to comply with all reasonable requests. In addition he was subject to the Ofcom rules and in the case of the BBC, their Standards and Editorial Guidelines.
This meant that the FTT had to consider whether the other provisions and circumstances of the contracts were sufficiently inconsistent with employment as to overturn the presumption arrived at under the first two tests.
Citing R & C Commrs v Atholl House Productions Ltd [2021] BTC 512, the FTT considered whether Mr Chiles (through his personal service company) was “in business on his own account”. The FTT decided that he was. Mr Chiles had appointed agents to act for him and promote his career. He also engaged a personal assistant to manage his diary and liaise with his many other clients (almost 100 between 1996 and 2019) and undertook other commercial projects, such as development of new TV program formats, personal appearances, voice-overs, writing newspaper articles and other speaking engagements. In this respect, the FTT felt that Mr Chiles was able to profit from good management.
HMRC contended that (following the “integration” test identified in Hall v Lorimer [1993] BTC 473) Mr Chiles was “part and parcel” of the businesses of the BBC and ITV but the FTT rejected this, finding that he was integral only to the extent that he presented their programmes but not beyond that.
Although there was an absence of risk in respect of the specific BBC and ITV contracts, the FTT found that the overall picture, looking at the circumstances as a whole, was consistent with Mr Chiles being in business on his own account. This was sufficient to displace the presumption of employment and the contracts were therefore contracts for services.
The appeal was allowed.
This is another high profile case to go against HMRC, although this case considered the IR35 rules as they applied during the years under appeal. At that time it was the responsibility of the intermediate company to consider the underlying hypothetical contract. Those rules now only apply where the end client is “small”.
Under the current “off-payroll working” version of the IR35 rules, medium and large end clients are responsible for the decision. Both the BBC and ITV would have been responsible for the IR35 decision as neither would be “small” within the meaning of the new legislation.
Adrian Chiles had originally been an employee of the BBC and incorporated BBL in 1996 at the instigation of the BBC who no longer wanted to employ him directly. Had the current off-payroll legislation applied at that time, there may have been an entirely different course of events.
[1] Mr Adrian Chiles is a well-known television and radio presenter. He started work at the BBC as a journalist in 1992 at the age of 25. In or about 1996 the BBC required Mr Chiles to cease his employment with a view to his services being provided through what is known as a personal service company. He set up the appellant (“BBL”) for that purpose and ceased his employment. At the same time, BBL entered into contracts with the BBC for the provision of Mr Chiles' services. By 2010, BBL was providing Mr Chiles' services to the BBC to present three different programmes, namely “The One Show”, “Match of the Day 2” and “The Apprentice: You're Fired”.
[2] In June 2010, BBL's contract to provide Mr Chiles' services to the BBC came to an end and BBL entered into a contract to provide his services to ITV. Mr Chiles was to be a presenter on ITV's new flagship breakfast television programme called “Daybreak”, as well as presenting ITV's coverage of live football and certain other factual entertainment programmes. ITV's football coverage included Champions League and international football matches. BBL contracted with ITV to provide Mr Chiles' services in relation to those programmes. Mr Chiles ceased to be a presenter of Daybreak in November 2011 but BBL's contract with ITV continued and he continued to present live football on ITV until 2015.
[3] In 2013, BBL contracted with the BBC for Mr Chiles to present programmes on BBC Radio 5 Live. Mr Chiles continues to present programmes on BBC Radio 5 Live.
[4] This appeal is concerned with tax years 2012–13 to 2016–17, covering the period from 6 April 2012 to 5 April 2017. During that period BBL provided Mr Chiles' services pursuant to two ITV contracts (“the ITV Contracts”) and three BBC contracts (“the BBC Contracts”) in addition to other work for other parties. HMRC have issued determinations in respect of income tax and notices of decision in respect of national insurance contributions (“NICs”) to BBL for those tax years. The determinations and decisions were made on the basis of the “intermediaries legislation” also known as IR35 contained in sections 48–61 Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”) and equivalent provisions in the Social Security Contributions (Intermediaries) Regulations 2000 (“the 2000 Regulations”). HMRC contend that the intermediaries legislation applies to the ITV Contracts and the BBC Contracts during the relevant tax years. The income tax and NICs said to be payable pursuant to the determinations and decisions is £1,249,433 and £460,739 respectively.
[5] Where the intermediaries legislation applies, it requires consideration of what are generally described as hypothetical contracts, in this case between ITV and the BBC on the one hand and Mr Chiles on the other. HMRC made the determinations and decisions on the basis that those hypothetical contracts would have been contracts of service (employment) rather than contracts for services (self-employment). In simplified terms, HMRC contend that Mr Chiles' status for the purposes of the intermediaries legislation was that of an employee and that BBL should account for tax and NICs accordingly. BBL...
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MPTL Ltd
...me to the recent judgements in R & C Commrs v Atholl House Productions Ltd [2022] BTC 12 (at [128] to [132]) and Basic Broadcasting Ltd [2022] TC 08400 (at [320] to [353]) which have elaborated on the factors to be considered when considering employment status. But Ms Au acknowledged that t......