Background
In 2018 HMRC won its first IR35 ruling in seven years against the former BBC presenter Christa Ackroyd; although she did try to argue that the limited company was set–up on the advice of the BBC and that she received reassurance from her accountant that the arrangement was tax compliant. This resulted in Ms Ackroyd being issued a tax liability of more than £400k.
In 2001 Ms Ackroyd commenced an assignment as a presenter on the BBC Yorkshire television program “Look North” which she continued to present until 2013. Ms Ackroyd worked at the BBC pursuant to this on two fixed term contracts between the BBC and the appellant, Christa Ackroyd Media Ltd (“CAM Ltd”). The first contract was dated 29th May 2001 and was followed by a later contract dated 4th May 2006 (“the Contract”). The Contract was terminated by the BBC on 28th June 2013.
Whilst providing services to the BBC and presenting Look North, Ms Ackroyd undertook work for several other clients. Ms Ackroyd held a position as a columnist for the Daily Mail, appeared in the TV drama A Touch of Frost and in the film Calendar Girls. Additionally. Ms Ackroyd also worked on a project with Daisybeck Productions.
IR35 Indicators
Substitution
Ms Ackroyd’s Limited Company, CAM Ltd, was prohibited from using a substitute, meaning Ms Ackroyd was not at liberty to provide a replacement in the event she was unable to perform the services.
Control
It is clear from the notes of the Tribunal that at the time of the contract being offered to Ms Ackroyd by the BBC, her understanding was that she would be given free reign “and could make whatever changes she wanted to the programme.” However, the Tribunal found that the BBC had control over what services Ms Ackroyd provided and her contract restricted her from providing services to other organisations in the UK without the consent of the BBC. Furthermore, she did not have editorial control over her work. She had space to oppose decisions, but the BBC always made the final call.
Mutuality of Obligations
In this case the existence of mutuality of obligations was cited as a pointer towards employment. CAM Ltd had a seven-year fixed term contract with the BBC, which could only be terminated in the event of a breach and the Tribunal stated “The existence of a seven-year contract meant that Ms Ackroyd’s work at the BBC was pursuant to a highly stable, regular and continuous arrangement. It comprehended a high degree of continuity rather than a succession of short-term engagements, which points towards an employment contract.” In addition to this, Ms Ackroyd was required to work for the BBC for at least 225 days in any one year.
This again reaffirms that mutuality of obligations is a significant element when considering IR35 status, and yet it has been excluded from HMRC’s CEST tool which has been used frequently since the IR35 reform was introduced into the public sector in April 2017.
Financial Risk
The Tribunal deemed Ms Ackroyd “economically dependent” on the BBC. Ms Ackroyd was contractually obliged to perform services, and the BBC was contractually obliged to pay fees to CAM Ltd on a monthly basis. There was no financial risk. Ms Ackroyd did not profit from the overall management of the business nor did she take any financial risk in her work. The Tribunal’s judgement said: “It was not realistically possible for Ms Ackroyd to make a loss in performing the contract.”
Exclusivity
Whilst Ms Ackroyd did undertake work for other clients, she was required to seek ‘consent’ to provide services in respect of television or radio in the UK; although Ms Ackroyd did argue that she only notified the BBC out of professional courtesy.
When the BBC came to terminate Ms Ackroyd’s contract, they did so due to breach of contract sighting that she had worked for other clients without obtaining permission from the BBC.
Conclusion
In this case, the key employment status tests (control, substitution and mutuality of obligations) all leaned towards an employment relationship. Control was clearly a prevalent factor and there was no valid right of substitution, as the very nature of the contract required Ms Ackroyd personally to undertake the work.
In relation to mutuality of obligation, the Tribunal held that it was present and a pointer towards employment.
Whilst it can be argued that Ms Ackroyd operated much like an employee this determination may be considered unfair in the sense that Ms Ackroyd set up a limited company on the recommendation of the BBC as it was in the interest of the BBC, to exonerate itself from any employment obligations, and yet the BBC came away completely unscathed.
It is a common misconception among contractors that undertaking concurrent work with several clients is sufficient to be deemed as outside of IR35. This case highlights that working for multiple clients is not a silver bullet and consideration must be given to all employment status indicators.