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HMRC allowed to appeal IR35 case ruling

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The Court of Appeal has ruled against HMRC in what could be a significant test case about whether freelancers are deemed to be inside or outside IR35.

The case – HMRC v Atholl House Productions Ltd – centres around radio and TV presenter Kaye Adams’ employment status and the extent to which she could be regarded as an employee for the BBC, for the purposes of PAYE and National Insurance contributions.

HMRC contended that being in business on one's own account was not highly relevant and should be given little weight during an IR35 status evaluation.

As such HMRC was pursuing her for what it believed was unpaid taxes.


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Adams argued that Atholl House Productions – her personal service company – was a company in its own right, and in her 20-plus years as a freelancer she had provided her services to a wide variety of media organisations and had never received any employment-related benefits such as holiday pay, sick pay, maternity leave or pension contributions.

Adams claimed she was not an “employee” of the BBC, because she “was not entitled or obliged to receive a review, was not subject to the formal procedures applicable to BBC employees when a change was made to the nature of their work obligations, and was not entitled to apply as an insider for internal vacancies.”

She also argued she “did not have to notify all of her competing engagements to the BBC.”

The agreement of this by the Court of Appeal is significant, because HMRC will now have to update its IR35 guidance and revisit all its existing IR35 litigation against freelancers, especially those working in the media.

In a statement Kay Adams said: “I am encouraged that the Court of Appeal has confirmed that a freelancer's career should be considered in its entirety when considering its status under the IR35 legislation. Many of my fellow freelancers will be enormously cheered by this conclusion.”

She added: “The costs of defending myself far outweigh the amount of tax that HMRC claim is at stake. Unlike HMRC, the hundreds of other freelancers under HMRCs spotlight do not have the bottomless pit of the public purse to dig into, and this inequality of arms is one reason many are choosing not to appeal.”

Dave Chaplin, CEO of IR35 Shield was present at the hearing, and he spoke exclusively to HR magazine.

He said: “HMRC tried to argue that she was employed for tax purposes, and therefore subject to two sets of NI and PAYE. To do this HMRC claimed it didn’t need to look outside her immediate engagement with the BBC, but the court disagreed.”

He added: “It means that freelancers, doing portfolio work can now argue that as long as they are doing the same types of services for other clients, this demonstrate that they are a business in their own account.”

Said Chaplin: “This decision by the Court of Appeal is a significant blow to HMRC's longstanding and contentious interpretation of employment status law, which will need to be revised, along with HMRC's various guidance products, including the Check Employment Status for Tax (CEST) tool.”

He added: “Freelancers who have multiple clients should be able to argue they fall outside IR35, aren’t disguised employees, and can demand to be hired on that basis.” He said: “The BBC may well now also be looking at what roles it considers to be inside or outside of IR35.”

The Court of Appeal considered two grounds from HMRC.

The first was a challenge by HMRC on fundamental aspects of status law, which contended that being in business on one's own account was not highly relevant and should be given little weight during a status evaluation.

The Court of Appeal unanimously rejected this interpretation of the law by HMRC.

The secondary ground by HMRC succeeded, resulting in the case being remitted back to the Upper Tribunal for final consideration.

An HRMC spokesperson said: “We welcome this judgement, which agreed that the Upper Tribunal had not applied the law correctly. The off-payroll rules are in place to ensure that people who work like employees, but through their own limited company, are taxed like employees, creating a level playing field with other workers.

“The judgment reinforces our published guidance for the media sector, particularly on radio and TV presenters.”

The Atholl House case was first heard and successfully appealed by Atholl House at a first-tier tribunal in March 2019. HMRC's appeal to the Upper-tribunal in November 2019 also failed, resulting in HMRC then appealing to the Court of Appeal.

This piece was updated on 28 April.