David Greene, NASA Group MD and IR35 expert has taken a considered view of HMRCs recent tax inspection ruling against Christa Ackroyd.
Ms Ackroyd, a presenter with the BBC has finally received her IR35 tax inspection ruling, 6 years after HMRC first raised the case. The freelance industry has waited many years for an IR35 case to shed further guidance on the law and this one is likely to change industry thinking on the right of control and the period of time working for a particular client.
The case is not typical of the freelance sector where a recruitment agency is normally involved and the parties are much more aware of IR35 status issues. The circumstances and conditions around the case of Ms Ackroyd working through her own limited company that ultimately lead to this decision were:
(Length of engagement) She was engaged as a presenter with the BBC for over 10 years, of which 7 were through her Limited Company.
(Mutuality of Obligation) She was guaranteed 225 days per year of work for which she would be paid regardless of her attendance.
(Right of Substitution) She was not allowed a substitute
(Control) She could only work on other roles with the permission of the BBC.
(Lack of professional advice) She did not receive IR35 reviews or status advice
(Contract of Employment as opposed to Services) The judge felt she was sufficiently controlled to amount to an employee.
This last point does move industry thinking, as expertise has in recent years suggested that knowledgeable employees are in control of how they do their role and are therefore outside of the scope of employee/employer control for IR35 status tests. In this circumstance, although Christa Ackroyd was not controlled in how she presented her shows, her presenting had to fit with the BBC ethos and ultimately, the BBC had the final editorial control on content and delivery of her news reports.
Applying this principle to today’s freelancers, it’s more likely that an IR35 judge could suggest that by working to the client’s standards that the end client has ultimate control on how a role is carried out. This was evident in some of the direction she took in her role at the BBC, even thought she was a consummate professional and very diligent and creative in presenting and preparing broadcasts.
Becoming economically dependent on one client did have a persuasion on this judge that employee characteristics were in place. We do stress that the longer an engagement, the more likely this is to fall in place and is a point we have often made in IR35 reviews.
Our overall assessment is that this case was heavily weighted with characteristics that fall foul of IR35, which is why HMRC have run with it for so many years. It also stresses the importance of PSC Directors engaging in complete contract and working practice reviews against IR35 caselaw, and not just contract reviews.
NASA Group provide in house IR35 appraisals for all our accountancy clients, with the service included for free in the first year of engagement. This thorough review provides the due diligence a LTD Company freelancer needs to ensure compliant operation.
For those who would like to read the details of IR35 cases, here the court link is below: http://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2018/TC06334.html&query=(Christa)+AND+(Ackroyd)