Christa Ackroyd Media Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 October 2019 |
| Neutral Citation | [2019] UKUT 326 (TCC) |
| Date | 25 October 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKUT 326 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Mann, Judge Thomas Scott
Jolyon Maugham QC and Georgia Hicks, instructed by Grant Thornton, appeared for the appellant
Adam Tolley QC and Christopher Stone, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax and National Insurance – Intermediaries legislation – IR35 – Personal service company – Whether sufficient control existed to mean that contract of employment would have arisen if services supplied direct to client – Yes appeal dismissed – ITEPA 2003, s. 49.
The Upper Tribunal (UT) upheld the First-tier Tribunal (FTT) decision in Christa Ackroyd Media Ltd [2018] TC 06334, that the BBC had sufficient control over the provision of services by Ms Ackroyd to satisfy the control requirement for an employment relationship.
Christa Ackroyd Media Ltd (CAM) was engaged under a seven-year contract with the BBC to provide the services of Christa Ackroyd (Ms Ackroyd) as a presenter on the BBC's Look North programme. HMRC contended that the hypothetical contract between the BBC and Ms Ackroyd which had to 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 have been treated as an employee of the BBC and CAM should have accounted for income tax and national insurance for the years 2006/07 to 2012/13 amounting to £419,151. Ms 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.
The FTT held that the intermediaries legislation applied to CAM for the periods under appeal on the basis that if Ms Ackroyd's services had been supplied directly to the BBC, there would have been a contract of employment.
CAM appealed to the UT on the grounds that the FTT had erred in law in concluding that under the hypothetical contract the BBC would have had sufficient control of Ms Ackroyd in order to establish an employment relationship if the services had been supplied directly.
The appellant argued that it was wrong to insert control as an implied term into the hypothetical contract. As the contract contained no express term dealing with ultimate control, the FTT should have concluded that the necessary control for an employment relationship did not exist.
The UT rejected this argument and stated that s. 49, ITEPA 2003 explicitly required the FTT not to restrict the exercise of constructing the hypothetical contract to the terms of the actual contract, but to assess whether the circumstances were such that an employment relationship would have existed if the relevant services had been provided by the individual directly and not via a service company, and s. 49(4) provided that the circumstances included the terms on which the services were provided, having regard to the terms of the contracts forming part of the arrangements. The FTT, therefore, was correct in considering whether the hypothetical contract would have included terms not set out in the contract.
Ms Ackroyd had argued that she would never have entered into a contract with the BBC if it meant that it would control the way in which she worked. However, the FTT were concerned with the hypothetical contract. At most this had only marginal relevance in a finely balanced case as a statement of intention.
The UT stated that it seemed unlikely that the BBC would give Ms Ackroyd an entirely free role in Look North without at least an expectation in carrying out her work that she would have abided by the Editorial Guidelines.
The UT also held that the FTT had reached a reasonable conclusion when it had rejected Ms Ackroyd's evidence that she had “day to day control” over her work and “led the team in the sense of control and decision-making”. The FTT had refused to accept that Ms Ackroyd had the final say on issues relating to Look North or her work on the programme. The FTT also concluded that the editor of Look North, on behalf of the BBC, had the ultimate right to decide what stories were covered and in what order.
The UT did not accept therefore the appellant's argument that there was no framework of control for Ms Ackroyd and found that the FTT was justified in reaching the conclusion that the right of ultimate control lay with the BBC.
Taking all these findings together and the fact that the contract between the BBC and CAM was for seven years, the UT concluded that the FTT did not make an error in deciding that the hypothetical contract contained sufficient control by the BBC over the provision of services by Ms Ackroyd.
The appeal was dismissed.
Ms Ackroyd stated that the only option she was given by the BBC was to work via a limited company. Under the hypothetical contract posited by s. 49, ITEPA 2003, the BBC had a sufficient degree of control over the provisions of the services by Ms Ackroyd to satisfy the control requirement necessary for the employment relationship. If the case had come under the new rules which came into effect in April 2017 for public sector contracts, the responsibility for operating the off-payroll working rules, and deducting any tax and national insurance due would have fallen on the BBC rather than Ms Ackroyd.
[1] This is the decision on an appeal by Christa Ackroyd Media Limited (“CAM”) against the decision of the First-tier Tribunal (“FTT”) published at [2018] TC 06334 (“the Decision”). CAM is the personal service company of the television journalist Ms Christa Ackroyd.
[2] In the Decision the FTT dismissed CAM's appeal, determining that the intermediaries legislation applied to CAM for the periods under appeal on the basis that if Ms Ackroyd's services had been supplied directly to the client (the BBC), there would have been a contract of employment.
[3] CAM appeals against the Decision with the permission of the FTT on the sole ground that the FTT erred in law in its conclusion that the BBC had sufficient control over Ms Ackroyd to mean that an employment relationship would have arisen if the services had been directly supplied.
[4] Ms Ackroyd is a television journalist and presenter who presented “Look North” on BBC 1 between 2001 and 2013. The appeal before the FTT related to a fixed term contract dated 4 May 2006 between the BBC and CAM, which was terminated by the BBC in June 2013 (“the Contract”). Between March 2013 and October 2014 HMRC issued to CAM determinations in respect of income tax and notices of decision in respect of national insurance contributions (“NICs”) under the “intermediaries legislation” which is set out below. The income tax determinations under appeal covered the tax years 2008–09 to 2012–13 and the national insurance notices the tax years 2006–07 to 2012–13. Together they totalled £419,151. At the invitation of the parties, the FTT dealt with the appeals in principle and did not deal with quantum.
[5] The intermediaries legislation is contained in sections 48 to 61 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”). The key provision is section 49, which provides, so far as relevant, as follows:
(1) This Chapter applies where –
- an individual (the worker) personally performs, or is under an obligation personally to perform, services for another person (the client),
- the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (the intermediary), and
- the circumstances are such that –if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client
…
(4) The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.
[6] A materially similar but not identical test is applied by the NICs legislation, in regulation 6 of the Social Security Contributions (Intermediaries) Regulations 2000. Before the FTT and before us, the parties agreed that in this case the effect of section 49 ITEPA 2003 and regulation 6 of the 2000 Regulations was the same, and the analysis in the Decision and before us focussed on section 49.
[7] The purpose of the intermediaries legislation was described in R (on the application of Professional Contractors' Group Ltd ) v IR Commrs [2002] BTC 17 as follows (at paragraph 51):
… the aim of both the tax and the NIC provisions (an aim which they may be expected to achieve) is to ensure that individuals who ought to pay tax and NIC 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
[8] Henderson J as he then was amplified this description in Dragonfly Consultancy Ltd v R & C Commrs [2008] BTC 639 as follows:
[9] The method adopted by the legislation to achieve this aim, broadly stated, is to tax an individual worker … whose services are provided to a client … through an intermediary (such as Dragonfly) on the same basis as would apply if the worker were performing those services as an employee, provided that (in terms of the income tax test set out in paragraph 1(1) of Schedule 12 to the Finance Act 2000):
- (c) the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.
In other words, the legislation enacts a statutory hypothesis and asks one to suppose that the services in question were provided under a contract made directly...
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