Christa Ackroyd Media Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 10 February 2018 |
| Neutral Citation | [2018] UKFTT 69 (TC) |
| Date | 10 February 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0069 (TC)
Judge Jonathan Cannan, Mr Nigel Collard
Mr Grant Summers of Grant Thornton UK LLP appeared for the appellant
Mr Adam Tolley QC and Mr Christopher Stone 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 – If the services were provided by the worker directly to the client, would there be a contract of employment – Whether tax relief available – Appeal dismissed in principle.
The First-tier Tribunal (FTT) found that the intermediaries legislation (commonly known as IR35) applied to arrangements under which the BBC contracted for the services of Christa Ackroyd as the presenter of the regional news programme “Look North”.
Christa Ackroyd Media Ltd (CAM Ltd) was engaged under a seven year contract with the BBC to provide the services of Christa Ackroyd up to 225 days per year. HMRC contended that the hypothetical contract between the BBC and Ackroyd which must be considered under the intermediaries legislation, under s. 49, ITEPA 2003, was a contract of service rather than a contract for services, therefore she should be treated as an employee of the BBC and CAM Ltd should account for income tax and national insurance for the years 2006/07 to 2012/13 amounting to £419,151. Ackroyd argued that her status for the purposes of the intermediaries legislation was that of a self-employed contractor, and there was no further liability on the part of CAM Ltd.
The FTT found that Ackroyd could not fairly be described as being in business on her own account as “she was economically dependent on the hypothetical contract with the BBC which took up most if not all of her time.” It held that a hypothetical contract of that length for at least 225 days per year and terminable only for a material breach pointed towards a contract of employment. The existence of a seven year contract meant that Ackroyd's work at the BBC was pursuant to a “highly stable, regular and continuous arrangement”. It involved a high degree of continuity rather than a succession of short term engagements which pointed towards an employment contract.
The FTT also found that the hypothetical contract would have been a contract of employment as:
- the BBC ultimately had the right to specify what services CAM Ltd would provide;
- the BBC had control over content, given its editorial responsibility (despite Ackroyd's ability to ad lib in a live news environment);
- there was mutuality of obligation: Ackroyd was contractually obliged to perform the services, and the BBC was contractually obliged to pay fees to CAM Ltd on a monthly basis;
- CAM Ltd had to provide Ackroyd and could not provide a substitute;
- Ackroyd's contract prevented her from providing services to other organisations in the UK without the BBC's consent.
Overall, the FTT concluded that making a qualitative assessment of the facts it considered that Ackroyd was an employee under a hypothetical contract. If the services provided by Ackroyd had been provided under a contract directly between the BBC and Ackroyd, then she would have been regarded for income tax purposes as an employee of the BBC.
The appeal was dismissed. The question of quantum of the determinations and outstanding issues in relation to penalties could be referred back to the Tribunal for further direction.
This was the first decision in a number of appeals concerning the application of the intermediaries legislation to television presenters who operated through personal service companies. However, the FTT stressed that this was not a lead case as such. Many BBC presenters were engaged through personal service companies rather than directly as either employees or self-employed freelancers. The intermediaries legislation applies to such arrangements if, among other conditions, the arrangements were such that had there been a contract directly between the BBC and the presenter it would have been a contract of employment.
[1] Christa Ackroyd is a television journalist who has been engaged in a variety of media roles since the 1970's. She co-presented a daily news digest known as “Calendar” for Yorkshire Television between 1990 and 2001. In 2001 she moved to present “Look North” on BBC1 which she continued to do until 2013. Ms Ackroyd worked at the BBC pursuant to two fixed term contracts between the BBC and the appellant, Christa Ackroyd Media Ltd (“CAM Ltd”). The first contract was dated 29 May 2001 and was followed by a later contract dated 4 May 2006 (“the Contract”). The Contract was terminated by the BBC on 28 June 2013.
[2] This appeal is specifically concerned with the Contract. CAM Ltd is what is known as a “personal service company”. HMRC have issued determinations to CAM Ltd in respect of income tax and notices of decision in respect of national insurance. Those determinations and decisions were made on the basis of the “intermediaries legislation” 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”).
[3] The determinations under appeal cover tax years 2008–09 to 2012–13. The decision notices under appeal cover tax years 2006–07 to 2012–13. Together they total some £419,151 and were issued between March 2013 and October 2014. The extent to which there should be a set off of corporation tax paid by CAM Ltd and tax paid on dividends from CAM Ltd to Ms Ackroyd has not been agreed. Ms Ackroyd contends that the liability to tax and national insurance even if the appeal is not successful is approximately £207,000. At the invitation of the parties this decision will deal with the appeals in principle. The question of quantum may be referred back to the tribunal if necessary.
[4] HMRC made the determinations and decisions on the basis that the hypothetical contract between the BBC and Ms Ackroyd which must be considered pursuant to the intermediaries legislation would have been a contract of service rather than a contract for services. In slightly simplified terms, HMRC contend that Ms Ackroyd's status for the purposes of the intermediaries legislation is that of an employee and that CAM Ltd should account for tax and national insurance accordingly. Ms Ackroyd contends that her status for the purposes of the intermediaries legislation is that of a self-employed contractor, and there is no further liability on the part of CAM Ltd.
[5] We understand that the present appeal is one of a number of other appeals involving television presenters and personal service companies. However, this is not a lead case as such.
[6] There is also an appeal against determinations and notices of decision for income tax and national insurance in connection with various payments by CAM Ltd to Ms Ackroyd to reimburse expenditure incurred by Ms Ackroyd. Those payments relate to subscriptions for Sky TV and additional expenditure said to have been incurred as a result of home-working. The determinations and decisions cover periods 2007–08 to 2011–12 and together they total some £14,469. We shall deal with the legal basis for those determinations and decisions, our findings of fact and our reasoning in a separate section of this decision once we have considered the principal issue relating to the intermediaries legislation.
[7] HMRC also imposed penalties on CAM Ltd in relation to both income tax and national insurance in connection with non-compliance with the intermediaries legislation. The income tax penalties were suspended and there is no appeal against those penalties. It appears that penalties were also imposed in relation to national insurance but were not suspended. It was not clear to us what if any penalties were imposed and under appeal in relation to the Sky subscriptions and the home-working expenditure. It is fair to say that the parties did not focus on the penalties in their submissions. In the circumstances the parties shall be at liberty to make further submissions in relation to penalties in the light of this decision.
[8] Both parties produced helpful skeleton arguments and written notes incorporated into their oral closing submissions. In addition to the documentary evidence before us, we heard oral evidence from Ms Ackroyd and from two other witnesses on her behalf. We set out below the nature of that evidence and our findings of fact based on that evidence. All our findings are made on the balance of probabilities. Before considering the evidence we set out the legal framework which defines the principal issue to be resolved, namely whether for the purposes of the intermediaries legislation Ms Ackroyd should be treated as an employee or a self-employed contractor. The parties referred us to a considerable body of caselaw in relation to that issue which we consider in more detail when giving reasons for our decision.
[9] The principal issue in the present appeal is whether the intermediaries legislation applies on the facts to the relationship between Ms Ackroyd, CAM Ltd and the BBC. If the legislation does apply then it is agreed that there will be a liability on the part of CAM Ltd to income tax and national insurance, although the amount of that liability will a matter for agreement or a subsequent hearing.
[10] The purpose of the intermediaries legislation was identified by Robert Walker LJ as he then was in R (on the application of Professional Contractors' Group Ltd) v IR Commrs [2002] BTC 17 at [51]:
to ensure that individuals who ought to pay tax and NICs as employees cannot, by the assumption of a corporate structure, reduce and defer the liabilities imposed on employees by the United Kingdom's system of personal taxation.
[11] The question whether the intermediaries legislation applies to any...
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