The Commissioners for HM Revenue and Customs v Atholl House Productions Ltd
| Jurisdiction | England & Wales |
| Judge | Sir David Richards,Lord Justice Arnold,Lord Justice Peter Jackson |
| Judgment Date | 26 April 2022 |
| Neutral Citation | [2022] EWCA Civ 501 |
| Docket Number | Case No: A3/2021/0769 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 501
Lord Justice Peter Jackson
Lord Justice Arnold
and
Sir David Richards
Case No: A3/2021/0769
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Mr Justice Marcus Smith and Judge Jonathan Richards
Royal Courts of Justice
Strand, London, WC2A 2LL
Adam Tolley QC, Christopher Stone and Marianne Tutin (instructed by The General Counsel and Solicitor to HM Revenue and Customs) for the Appellants
Keith Gordon and Ximena Montes Manzano (instructed by Sharpe Pritchard LLP) for the Respondent
Hearing dates: 9 and 10 February 2022
Approved Judgment
This judgment was handed down by the Court remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 on 26 April 2022
Introduction
This appeal concerns the application of legislation, commonly referred to as the Intermediaries Legislation or IR35, which will, if certain conditions are satisfied, treat a person whose services are provided through a service company as an employee for the purposes of PAYE and National Insurance contributions.
In the present case, the services of Ms Kaye Adams were provided by her personal service company, the respondent Atholl House Productions Limited (Atholl House), under contracts with the British Broadcasting Corporation (the BBC) to present a radio show called “The Kaye Adams Programme” on BBC Radio Scotland. The Commissioners for Revenue and Customs (HMRC) determined that IR35 applied to these arrangements and that Atholl House was accordingly liable to pay income tax under the PAYE system and NI contributions in respect of the earnings under those contracts as if Ms Adams had been employed by the BBC. These decisions related to the four tax years 2013/14 to 2016/17.
Atholl House appealed those decisions to the First-tier Tribunal (Judge Tony Beare and Mr Duncan McBride) (the FTT). HMRC did not oppose the appeal as regards the first two of those years, for reasons which I explain below, but maintained their opposition to the appeals as regards 2015/16 and 2016/17. The aggregate amounts involved for those years were £81,150.60 PAYE and £43,290.98 NI contributions. The FTT allowed the appeals. The decision of the FTT was upheld, on different grounds, by the Upper Tribunal (Marcus Smith J and Judge Jonathan Richards). HMRC appeals to this Court with permission granted by the UT.
IR35
The statutory provisions relevant to the present appeal are contained, as regards PAYE, in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and, as regards National Insurance contributions, the Social Security Contributions (Intermediaries) Regulations 2000. Although not expressed in identical terms, it was common ground that there was no difference in their effect for the purposes of this appeal.
Section 49 of ITEPA provides, so far as relevant:
“(1) This Chapter applies where —
(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),
(b) 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
(c) the circumstances are such that —
(i) 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.”
There was no dispute that the conditions in paragraphs (a) and (b) of section 49(1) were satisfied. Ms Adams personally performed services for the BBC, under arrangements with Atholl House rather than under a direct contract with the BBC.
As regards the application of the condition in section 49(1)(c), it has been common ground between the parties that the following three stage process provides a helpful structure:
(1) Stage 1. Find the terms of the actual contractual arrangements (between Atholl House and the BBC on the one hand and between Ms Adams and Atholl House on the other) and relevant circumstances within which Ms Adams worked.
(2) Stage 2. Ascertain the terms of the “hypothetical contract” (between Ms Adams and the BBC) postulated by section 49(1)(c)(i) and the counterpart legislation as applicable for the purposes of NICs.
(3) Stage 3. Consider whether the hypothetical contract would be a contract of employment.
The facts in summary
The FTT described Ms Adams's work and career in its Decision at [6]:
“The Appellant is the personal service company of Ms Kaye Adams, who performs services for the BBC and other media organisations. Ms Adams started her career with Central Television in 1984 and has been a freelance journalist since the mid-1990s. Her work other than for the BBC has included appearances on TV in programmes such as “Loose Women” on ITV and the newspaper review on Sky, together with columns for various newspapers and magazines such as The Daily Mirror, The Sunday People and No 1 magazine. In addition, Ms Adams has worked extensively in the corporate sector, hosting events and awards evenings and giving presentations. Ms Adams also has a significant social media profile and has written two books in collaboration with her friend and colleague, Ms Nadia Sawalha.”
The witnesses at the FTT hearing included Ms Adams and, as a witness called by HMRC, Mr Colin Paterson. Mr Paterson, an employee of the BBC, was editor in charge of The Kaye Adams Programme between April 2015 and December 2016. The FTT summarised their evidence at [57]–[58]. Although the Decision does not contain an express finding which accepts this evidence, it seems to me implicit that it did so.
It is not necessary for the purposes of this judgment to set out the full summary of this evidence, but the following points may be noted:
i) Ms Adams had been a freelance journalist for more than 20 years, during which she had provided her services to a wide variety of media organisations, including the BBC. Over that period, she had never received any employment-related benefits such as holiday pay, sick pay, maternity leave or pension contributions.
ii) She had since 2010 presented a morning radio phone-in programme for BBC Scotland, although the number and duration of the programmes had fluctuated over that time. Her services were provided under a series of contracts, each with a term of about one year.
iii) Under at least some of the contracts, including those covering the tax years in issue, there was a minimum commitment on her part and a minimum fee payable by the BBC. If she was unable to fulfil her minimum commitment because of her own unavailability, her minimum fee would be reduced by a pro rata amount.
iv) Whilst on air, Ms Adams had ultimate control over which callers to take, what questions to ask and which direction the programme should follow, although other members of the team would make suggestions. She had control of the microphone and the BBC could not stop her mid-programme, but the BBC could suspend her, or in the last resort terminate her contract, for a breach of its broadcasting standards and guidelines.
v) The contracts in the earlier years were reviewed by Ms Adams' agent, but she saw no need to incur her agent's fee as regards the later contracts, including those covering the tax years in issue.
vi) The BBC never placed any restrictions on her work for others and she never sought the BBC's permission for her other engagements. She would often tell other members of the team what she was planning to do, but not for the purpose of seeking permission. Mr Paterson had referred to Ms Adams as “very much a broadcaster in her own right, given that she works for others, she isn't “BBC's Kaye Adams”, she is a journalist who happens to work for us”.
During the two tax years in issue, the Kaye Adams Programme ran for three hours on weekday mornings from 9am to 12 noon, with a phone-in for the first hour and items of topical interest for the rest of the programme.
Contracts between Atholl House and the BBC
Ms Adams' services were provided to the BBC under annual contracts with Atholl House. The contracts were in writing and, save as stated below, it was not suggested that there were any other terms which were either agreed orally or were to be inferred from the conduct of the parties. There were no relevant differences between the contracts covering 2015/16 and 2016/17, and references below are to provisions of the contract which covered the period 16 March 2015 to 31 March 2016.
Part A of the contract set out a schedule of services and fees specific to Ms Adams. She was described as a contributor providing services and the services were as “presenter”. It specified, for the contract period, a minimum commitment of 160 programmes (“Radio – ‘Kaye Adams’”) and a minimum contract fee of £155,000 (subject to clause 6.5 of part B of the contract). If the minimum commitment was exceeded, a fee of £968.75 was payable for each programme. Fees were payable monthly on completion of work.
Part B of the contract contained the “BBC general terms of trade (LTC) for freelance contributors (service company)” in a standard form. As used in part B, the terms “the Company” and “the Contributor” referred in this case to Atholl House and to Ms Adams respectively. In addition, a BBC employee was identified as “the “BBC Representative”.
The FTT's...
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