Christa Ackroyd Loses IR35 case against HMRC
Former BBC Look North presenter Christa Ackroyd lost her appeal against HMRC in IR35 ruling which claimed that she owed National Contributions Insurance (NICs) and Income Tax amounting to £419,151 covering for tax years 2006/07 to 2012/13. This result affects many other BBC presenters who used PSC (Personal Service Companies) to be in a hypothetical contract with Britain’s one of the largest public service broadcaster.
Case on Christa Ackroyd
Christa Ackroyd was using Christa Ackroyd Media (CAM Ltd) to work as a self-employed contractor for BBC from 2001 till 2013. However, the contracts were such that the court indicated it seemed similar to being an employee of the firm. The following points were sufficient for the court to indicate her within the scope of IR35-
1. Control of services – CAM Ltd was obliged to accept the type of service that was specified by BBC. Although Ms Ackroyd had some control over how her show Look North was presented and had independence over work but the final call was made by BBC which was justified by their Editorial Guidelines. These guidelines were not contractually binding but suggested an overall right of control.
2. No substitution for work – CAM was prohibited from sending a substitute for Ms Ackroyd. The absence of right to substitute is an indication towards her employment.
3. Restriction to providing services outside of BBC – Ackroyd was not supposed to provide service outside of BBC without their prior consent. She was, in fact, writing weekly columns for Sunday Express which was strongly opposed by BBC amid concerns over impartiality. However, she did resign from the paper in January 2007.
4. Fees – BBC was obliged to pay CAM monthly fees for the services provided by Ackroyd. Ms Ackroyd was also entitled to £3,000 per year expenses allowance for uniform.
As per the tribunal’s judgment, they deemed her as “economically dependent” on BBC. However, they also announced that Ms Ackroyd is not to be criticized for her decisions since she took professional advice and was also encouraged by BBC to contract through a PSC.
What is IR35 and how does it affect you?
IR35 is a set of anti-avoidance rule to prevent disguised employment. It was meant to stop the misuse of tax benefits associated with working through your own company (where the person need not pay National Insurance Contributions and can minimize his/her tax liability). A contractor must check all the points which might make his/her PSC fall under IR35 scrutiny before going ahead and signing the contract.
What does this win mean for HMRC and other BBC contractors?
This win is surely going to boost HMRC’s confidence in pursuing a case against other presenters who used PSC’s as a way to minimize their taxes. Currently, they have over 100 BBC presenters under their radar. But going by the trend, not only the BBC presenters but presenters from other broadcasting organizations should also be worried about HMRC clampdown.
The use of PSC was pretty much a norm back in 2000’s which led to HMRC introducing IR35 legislation. This practice was further highlighted by a report published by Deloitte which found that a lot many presenters in the broadcasting industry were using PSC’s as a method of saving taxes when they should have been considered as regular employees.
Future Implication of IR35
Following a clampdown on the public sector in 2016, HMRC is planning to apply IR35 to the private sector in 2019. This could mean that if the rule is implemented, businesses will have to check whether the contractors engaged via intermediary companies are likely to be found as employees of the client company or not.
How to safeguard yourself against IR35?
IR35 legislation is complex in nature and if misinterpreted, can have wide repercussions on the freelance and self-employed people. Even though Ms Ackroyd took precautions by consulting with her accountant and BBC, yet her engagement with BBC was firmly within the scope of IR35.
To ensure that your contract does not fall under IR35, take the IR35 test and save tax worth thousands of pound. In addition to these, you should also get your contract checked by an expert accountant who has knowledge and experience in dealing with IR35.