Over the past few weeks we have noticed a growing number of questions over why the recent First-Tier Tribunal case decided in favour of HMRC rather than Ms Christa Ackroyd, the former BBC television presenter.
Ms Ackroyd used a limited company (CAM Limited) to provide services to the BBC from 2001 until the termination of the contract in 2013. The contract was operated outside of IR35 throughout its entire length.
The judgment considered the key aspects of Control, Substitution and Mutuality of Obligations and provided a great example of how HMRC view each of them and use them as they require. In recent years, we have seen a reduction in activity from HMRC in pursuing rulings over IR35. However, even though this recent case is considered a win for HMRC, nothing has changed with respect to IR35 and how it is operated.
The ruling helps bolster the current key aspects and ensures you are working in the correct manner depending on your contract and working practices.
HMRC successfully argued that the BBC retained overall editorial responsibility and control over the content that Ms Ackroyd featured on. It was argued by Ms Ackroyd that she had a high degree of autonomy in carrying out the work and had some influence over how Look North was presented. However, ultimately the content was subject to the BBCs Editorial Guidelines and this was used as evidence for an overall right of control. In addition, Ms Ackroyd was restricted to require written consent as to who she could work for (other than the BBC) and she was also deemed not to be proactively looking for additional work.
When you operate outside of IR35 you would look to prove that your client has no right, nor shall seek to, exercise any direction, control, or supervision over the provision of the services. You can endeavor to co-operate with reasonable requests within the scope of the services, however it should be acknowledged that you have autonomy over your working methods.
Mutuality of Obligations
The contract in place between CAM Limited and the BBC was for a fixed term of seven years with the BBC retaining “first call” on Ms Ackroyd’s service for 225 days out of the year. Using past case Law, it was proven that the work was “pursuant to a highly stable, regular and continuous performance” and deemed there was an obligation for work to be provided by the BBC, and accepted by CAM Limited.
Operating outside of IR35 you would look to show that there is no obligation for the client to provide your company with work, or any obligation for you to accept any work, during or upon termination of the services provided. This can include extensions to work or rolling contracts.
Substitution was shown as an unrealistic proposition as the BBC required Ms Ackroyd to perform the services as a presenter rather than as an agreed “supply of services” that a typical contract involving personal service companies may require. The BBC required a newsreader and not a delivery of a project, where the individual used is not essential.
In general, you would want to have complete discretion over who performs the service and that you may provide a substitute whenever necessary. Certain restrictions may be applied by the client, such as a person should be capable of performing the services required.
Other factors considered
It was decided that there was little evidence of Ms Ackroyd being in business on her own account. What’s more, she was entitled to a £3,000 per year expense allowance for ‘suitable clothing’ which would generally only be provided by an employer. In addition, the BBC paid CAM Limited’s fees on a regular basis but importantly, even when Ms Ackroyd’s services where not required.
When operating outside of IR35, there are a number of other factors you can use to support your status.
These would include:
- Insurance – are you required to provide insurance for the work you perform?
- Work for others – do you carry out work for others and in what capacity?
- Defects – are you required to repair any defects at your own cost?
- Equipment – are you required to provide your own equipment?
- Training – are you required to carry out all necessary training as is suitable for delivery of the services?
What can you do?
Prior to the start of any new or existing contract, you should take competent advice as to the suitability of your contract. At Clever Accounts, we provide IR35 reviews as part of the ongoing monthly service and we will explain the factors that will help in the defence of any HMRC investigation into your company.