Ackroyd v HMRC- The end of the road?
In March 2018 we published a blog on the case of Christa Ackroyd Media Ltd v HMRC at the first-tier tribunal (FTT).
In short, the FTT found that former BBC ‘Look North’ presenter Christa Ackroyd was caught by the IR35 anti-avoidance rules and was therefore an employee rather than a freelance contractor through her personal service company, Christa Ackroyd Media Ltd (“CAM”).
The FTT stated that where individuals are engaged through an intermediary (in this case CAM) under hypothetical contract terms that would represent employment by the end user if engaged directly, the intermediary must treat their monies received as income and operate PAYE.
The FTT asserted that a test of overall control and mutuality of obligation were relevant terms, and these were satisfied in this case. This is because Ackroyd had to abide by the BBC’s Editorial Guidelines (showing ultimate control), and in return for a fee Ackroyd had to work 225 days a year (showing mutuality of obligation). They also considered the fact Ackroyd was contracted to work for the BBC for 7 years to be a significant factor in suggesting employment.
Therefore, as employment was found Ackroyd was liable to pay £419,151 in income tax and NIC.
This case was appealed to the Upper Tribunal (“UT”). The appeal was based solely on the finding that the BBC had sufficient control over Ackroyd.
She contended she wouldn’t have entered into a contract with the BBC if this was the case and stated factors such as the fact she had no line manager, was not subject to formal appraisals and the BBC having a limited right to terminate her was evidence of her in-dependency.
However, the UT rejected this reasoning stating it was unlikely that Ackroyd was have an entirely free reign in carrying out her work without abiding by the BBC’s Editorial Guidelines.
Nonetheless, the UT did agree that the FTT had taken the wrong approach by considering whether the right of overall control was an implied contract term. Instead, the correct test was not whether the BBC would control Ackroyd, but whether they could do so.
Ultimately the UT agreed with the FTT that although Ackroyd was not contractually bound by the Editorial Guidelines, both parties understood these guidelines could be enforced if required. Therefore, although the FTT had taken the wrong approach, the right conclusion was reached in finding that the BBC had a sufficient degree of control over the provision of services to satisfy the control element necessary for an employment relationship.
The appeal was therefore dismissed.
Why it matters
There are many cases like Ackroyd’s in court, however some have reached opposite conclusions. This suggests the overall context is important and shows how complex the IR35 rules can be.
In addition, from April 2020, medium and large private sector businesses will be responsible for setting the tax status or IR35 of contractors.
Ackroyd v HMRC – Nothing Personal (29 March 2018)
IR35 – What is it and how is it changing? (30 January 2017)