In Paya Ltd others v HMRC [2019] UKFTT 583 (17 September 2019), the FTT found that arrangements between personal service companies and the BBC had created employment relationships (ITEPA 2003 s 49).
The three appellants were PSCs formed by three news presenters to provide their services to the BBC for a number of years, under a series of contracts between each PSC and the BBC. The issue was whether the relationship between the BBC and the presenters would have been one of employment in the absence of the PSCs.
The FTT noted that the exercise involved ‘looking at all factors in the context of the provision of the presenters’ highly skilled journalistic services in a live BBC news broadcasting environment’. Applying the tests set out in Ready Mixed Concrete [1968] 2 QB 497, the tribunal found that an employment relationship would have been created. It found that the presenters were engaged by the BBC to provide their services continuously over five years, under a series of contracts with very similar terms. Under each contract, the BBC was obliged to call on the presenters’ services on a minimum number of days; and, if called upon to do so, the presenters were obliged to work on that minimum number of days. The ‘mutuality of obligations’ test was therefore satisfied.
The FTT also noted that the presenters were subject to the BBC’s ultimate right of control under ‘a framework of control as regards the thing to be done, when and where they performed their services and to some extent as regards the manner in which they did so’. It was also ‘particularly significant’ that the BBC had the right to prevent the presenters from presenting for any other broadcaster.
Finally, the FTT rejected the notion that The Income Tax (PAYE) Regulations 2003 reg 80(5) was intended to apply to deem a determination under reg 80 to be an assessment for the purposes of TMA 1970 s 29(1). The tribunal observed that reg 80(1) contains its own threshold requirement for HMRC to be able to make a determination; and that it ‘appears’ to an officer that there is a shortfall of tax so that it would be ‘most odd’ for reg 80(5) to impose in effect a different threshold requirement by reference to whether an officer ‘discovers’ an insufficiency of tax under TMA 1970 s 29.
In case it was wrong, the tribunal considered whether the discoveries were stale and whether the presenters’ advisers had been careless. It found that the discoveries had not lost their ‘newness’ by the time the determinations were issued. However, the tribunal rejected HMRC’s contention that a longer time limit applied on the basis of the carelessness of the advisers. It noted that for HMRC’s argument to succeed, it would have to show that the advisers did not consider IR35 at all or carelessly took the view that IR35 did not apply. An inference that the advisers were acting on behalf of the relevant PSCs in relation to IR35 was not of itself sufficient to shift the burden of proof to the PSCs.
Why it matters: The FTT rejected the notion that the taxpayers’ advisers had been careless simply by acting for PSCs. It noted, in relation to one of them, that he had undertaken professional training, reviewed the relevant documents and consulted textbooks and other authorities. The fact that he had not consulted HMRC’s contract review service was not relevant. It was open to professionals ‘to rely on their own assessment of the law rather than HMRC’s view of it’.
Crucially, ‘it cannot be the case that a person is necessarily careless because he took a view that is later found to be incorrect, in particular, where determining whether the relevant legislation applies depends on making a difficult value judgment’ (para 723).
In Paya Ltd others v HMRC [2019] UKFTT 583 (17 September 2019), the FTT found that arrangements between personal service companies and the BBC had created employment relationships (ITEPA 2003 s 49).
The three appellants were PSCs formed by three news presenters to provide their services to the BBC for a number of years, under a series of contracts between each PSC and the BBC. The issue was whether the relationship between the BBC and the presenters would have been one of employment in the absence of the PSCs.
The FTT noted that the exercise involved ‘looking at all factors in the context of the provision of the presenters’ highly skilled journalistic services in a live BBC news broadcasting environment’. Applying the tests set out in Ready Mixed Concrete [1968] 2 QB 497, the tribunal found that an employment relationship would have been created. It found that the presenters were engaged by the BBC to provide their services continuously over five years, under a series of contracts with very similar terms. Under each contract, the BBC was obliged to call on the presenters’ services on a minimum number of days; and, if called upon to do so, the presenters were obliged to work on that minimum number of days. The ‘mutuality of obligations’ test was therefore satisfied.
The FTT also noted that the presenters were subject to the BBC’s ultimate right of control under ‘a framework of control as regards the thing to be done, when and where they performed their services and to some extent as regards the manner in which they did so’. It was also ‘particularly significant’ that the BBC had the right to prevent the presenters from presenting for any other broadcaster.
Finally, the FTT rejected the notion that The Income Tax (PAYE) Regulations 2003 reg 80(5) was intended to apply to deem a determination under reg 80 to be an assessment for the purposes of TMA 1970 s 29(1). The tribunal observed that reg 80(1) contains its own threshold requirement for HMRC to be able to make a determination; and that it ‘appears’ to an officer that there is a shortfall of tax so that it would be ‘most odd’ for reg 80(5) to impose in effect a different threshold requirement by reference to whether an officer ‘discovers’ an insufficiency of tax under TMA 1970 s 29.
In case it was wrong, the tribunal considered whether the discoveries were stale and whether the presenters’ advisers had been careless. It found that the discoveries had not lost their ‘newness’ by the time the determinations were issued. However, the tribunal rejected HMRC’s contention that a longer time limit applied on the basis of the carelessness of the advisers. It noted that for HMRC’s argument to succeed, it would have to show that the advisers did not consider IR35 at all or carelessly took the view that IR35 did not apply. An inference that the advisers were acting on behalf of the relevant PSCs in relation to IR35 was not of itself sufficient to shift the burden of proof to the PSCs.
Why it matters: The FTT rejected the notion that the taxpayers’ advisers had been careless simply by acting for PSCs. It noted, in relation to one of them, that he had undertaken professional training, reviewed the relevant documents and consulted textbooks and other authorities. The fact that he had not consulted HMRC’s contract review service was not relevant. It was open to professionals ‘to rely on their own assessment of the law rather than HMRC’s view of it’.
Crucially, ‘it cannot be the case that a person is necessarily careless because he took a view that is later found to be incorrect, in particular, where determining whether the relevant legislation applies depends on making a difficult value judgment’ (para 723).
