A 'finely balanced' case goes in the taxpayer's favour.
Kaye Adams is a broadcaster and journalist who provides her personal services through an intermediary, Atholl House Productions Ltd. The question for the FTT - in the latest instalment of a case remitted back to it from the Court of Appeal - was whether the arrangement used to provide those services to the BBC was caught by the intermediaries legislation, commonly referred to as IR35.
The three-stage test laid down by the courts to determine if an engagement is within IR35 is well established:
Stage one: Find the terms of the actual contract between the intermediary and the BBC.
Stage two: Ascertain the terms of the hypothetical contract between Ms Adams and the BBC.
Stage three: Consider whether the hypothetical contract is one that would be a contract of employment if there was a direct engagement between Ms Adams and the BBC.
Furthermore, stage three is broken down into a further three tests as described by MacKenna J in Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 97 (RMC).The first two limbs of those tests will be met where a wage or remuneration is received for the provision of personal service, and there is a sufficient degree of control exercised over the worker. The third limb considers to what extend the worker is in business on their own account. All three must be met to establish whether the hypothetical contract is one of employment or not.
It was not in dispute Ms Adams performed services for the BBC under a contract between the appellant and the Corporation. The findings of the higher courts in respect of stages one and two were not disturbed by the FTT, nor did they consider it open to them to re-make the original decision in regard to the first two limbs of the stage three test.
The decision therefore came down to the facts that needed to be weighed-up in the third limb of RMC to decide if the hypothetical contract had the features of Ms Adams being in business on her own account, or instead was one that had the features of a contract of employment. This is not a simple check box exercise, but rather one that may place more weight on some factors than others particularly when considering the activity being engaged for.
In reaching its conclusion, the FTT considered that several factors - the time commitment Ms Adams gave to the BBC; the fact that a minimum payment was due to her in return for minimum commitment (notwithstanding the limited right to use a substitute); the fact that the BBC had the right to limit Ms Adams non-BBC engagements; and the overall control exercised by the BBC - pointed towards the hypothetical contract being one of employment.
In contrast, the absence of customary employment rights such as access to internal vacancies, being responsible for her own wardrobe and the written intention not to create a contract of employment, pointed towards a hypothetical contract that would be one of self-employment. The FTT did recognise, however, that such written intention would normally carry little to no weight, except in borderline cases - which it considered this to be.
There were also neutral factors that did not point one way or the other. This included the waiving by Ms Adams of intellectual and moral rights to the programming, and that the programming was branded in her name indicating a certain level of integration into the Corporation.
In finding the engagement was outside IR35, the judge stated that this was a difficult case to decide with some finely balanced factors. Those comments may give HMRC encouragement to take an appeal forward.
Home >Articles > Round 4: Kaye Adams wins 'finely balanced' IR35 case
Round 4: Kaye Adams wins 'finely balanced' IR35 case
A 'finely balanced' case goes in the taxpayer's favour.
Kaye Adams is a broadcaster and journalist who provides her personal services through an intermediary, Atholl House Productions Ltd. The question for the FTT - in the latest instalment of a case remitted back to it from the Court of Appeal - was whether the arrangement used to provide those services to the BBC was caught by the intermediaries legislation, commonly referred to as IR35.
The three-stage test laid down by the courts to determine if an engagement is within IR35 is well established:
Stage one: Find the terms of the actual contract between the intermediary and the BBC.
Stage two: Ascertain the terms of the hypothetical contract between Ms Adams and the BBC.
Stage three: Consider whether the hypothetical contract is one that would be a contract of employment if there was a direct engagement between Ms Adams and the BBC.
Furthermore, stage three is broken down into a further three tests as described by MacKenna J in Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 97 (RMC).The first two limbs of those tests will be met where a wage or remuneration is received for the provision of personal service, and there is a sufficient degree of control exercised over the worker. The third limb considers to what extend the worker is in business on their own account. All three must be met to establish whether the hypothetical contract is one of employment or not.
It was not in dispute Ms Adams performed services for the BBC under a contract between the appellant and the Corporation. The findings of the higher courts in respect of stages one and two were not disturbed by the FTT, nor did they consider it open to them to re-make the original decision in regard to the first two limbs of the stage three test.
The decision therefore came down to the facts that needed to be weighed-up in the third limb of RMC to decide if the hypothetical contract had the features of Ms Adams being in business on her own account, or instead was one that had the features of a contract of employment. This is not a simple check box exercise, but rather one that may place more weight on some factors than others particularly when considering the activity being engaged for.
In reaching its conclusion, the FTT considered that several factors - the time commitment Ms Adams gave to the BBC; the fact that a minimum payment was due to her in return for minimum commitment (notwithstanding the limited right to use a substitute); the fact that the BBC had the right to limit Ms Adams non-BBC engagements; and the overall control exercised by the BBC - pointed towards the hypothetical contract being one of employment.
In contrast, the absence of customary employment rights such as access to internal vacancies, being responsible for her own wardrobe and the written intention not to create a contract of employment, pointed towards a hypothetical contract that would be one of self-employment. The FTT did recognise, however, that such written intention would normally carry little to no weight, except in borderline cases - which it considered this to be.
There were also neutral factors that did not point one way or the other. This included the waiving by Ms Adams of intellectual and moral rights to the programming, and that the programming was branded in her name indicating a certain level of integration into the Corporation.
In finding the engagement was outside IR35, the judge stated that this was a difficult case to decide with some finely balanced factors. Those comments may give HMRC encouragement to take an appeal forward.
