An IT contractor’s walk-through to Kaye Adams’s convoluted IR35 case, and how she edged victory

You’ve probably heard a lot about the Kaye Adams IR35 case, otherwise known as Atholl House Productions Ltd v. HMRC [2023].

The case had been remitted back to the FTT from the Court of Appeal but, what was interesting to me was the reasoning for the FTT judgment and the analysis of the factors.

The Adams case; hardly on all fours

I’m often asked, writes Rebecca Seeley Harris of off-payroll rules advisory ReLegal Consulting, “What does this Kaye Adams IR35 case mean for me?”

Well, First-tier tribunal judgments are useful if the facts are on ‘all fours.’ But, it must be remembered that FTT cases do not set a precedent, and so each have limited use, compared to the IR35 cases from the appeal courts.

In Adams though, it has been up to the Court of Appeal already so, it’s guided by their judgment.

The written, actual, and hypothetical contracts

Firstly, the FTT looked at the ‘hypothetical contract.’ 

This involved looking at firstly, the ‘written contract’ and then the ‘actual contract’ and then stage 3, determining the terms of the ‘hypothetical contract.’

Having established what the hypothetical contract was, Stage 3 of the proceedings looked at the three-step test laid out by McKenna J in the Ready Mixed Concrete case. 

The three steps are (and were numbered by the hearing as):

(1) Stage 3A - mutuality of obligations;

(2) Stage 3B - control; and

(3) Stage 3C - the other terms of the hypothetical contracts and the circumstances in

which the hypothetical contracts arose.

Stage 3A – mutuality of obligations

The FTT thought, firstly, that the dominant feature of the hypothetical contract was one of personal performance on the part of Adams. 

Although there was a substitution clause, Adams did not consider that she had the right to substitute and, in fact, the BBC would have replaced her in such a circumstance. 

Having said that, the FTT considered that failure to exercise a substitution clause does not mean that the right does not exist but, it does mean that the substitution clause is not a dominant feature. The FTT, therefore, concluded that Stage 3A relating to mutuality of obligations was satisfied.

Stage 3B – control

The FTT also concluded that the element of control had been satisfied but, this was with regard to the fact that Adams was highly skilled. 

Where an individual is highly skilled, the ‘how’ part of control is largely irrelevant. 

The FTT commented: “A level of skill which is not susceptible to direction by anyone else in the organisation by whom he or she is engaged, control over the ‘what’ is the most significant aspect of the test.” 

Stage 3C – the other terms and circumstances of the hypothetical contract

The FTT commented that Stage 3C was the critical part of the decision. 

The focus in Stage 3C was not on mutuality of obligations or control or, indeed, the circumstances that the contract came into existence. It was, in fact, on the terms of the hypothetical contract and the wider circumstances. 

Although, Adams’s other engagements could not be considered because the tribunal did not know what the terms of those engagements were and whether they were employed or self-employed.

The factors for and against Kaye Adams

These are obviously factors for and against Adams employment status and these included:

Employed:

1. Length of the relationship.
2. Time commitment – this was substantial.
3. Mutuality of obligations – the BBC was required to pay the minimum fee for the minimum commitment.
4. Control – the rights of control were significant. The control of what, when and where, were considerable and, in overall terms, pointed to a contract of employment.
5. Control over other engagements was “far-reaching.”
6. The BBC had a ‘right of first call.
7. Editorial training and medicals.

Self-employed:

1. Custom & practice – it was custom and practice in the industry for presenters to be self-employed.
2. Brand – Kaye Adams was her own brand (much like the Lorraine Kelly and Adrian Chiles cases).
3. No employee benefits or rights – the BBC did not treat Adams like an employee and she was not entitled to employment benefits such as holiday pay.
4. Equipment – Adams had to provide her own equipment in the form of an iPad and a mobile phone.
5. Clothing – Adams had to provide her own clothing. 
6. Intention – where a case is finely balanced, the court can look at the intention of the parties which, in this case, was clearly one of self-employment.

What the tribunal found in relation to the terms

The FTT also pointed out that the terms of the hypothetical contract as a whole tend to indicate that the relationship was one of employment. 

The FTT then considered, however, that there was an absence of control over other engagements in practice; an absence of editorial training, and the time commitment in previous tax years.

The tribunal also found that the “part and parcel” test was evident in that Adams’s programmes were an integral part of the activities of the BBC but, not in an organisational sense. So, “part and parcel” was considered neutral. They also did not think that financial risk was a factor.

Concluding thoughts

Despite there being very strong evidence for a contract of employment, the FTT decided in Adams’s favour -- it was a contract for services. 

Whether HMRC appeals this decision or not will remain to be seen but, Adams may have an anxious wait over Christmas because the tax office has 56 days to decide.

It seems that these presenter cases are based mainly on whether the individual is a ‘brand’ or not but, it is still interesting to read the view on factors from different judges. There doesn’t seem to be any continuity at all at the moment! (N.B. Phil Thompson, who presented for Sky Sports, has just lost his IR35 case).

Very difficult, inefficient, and convoluted. It must be IR35…

The FTT stated on numerous occasions that they had found the Adams case “very difficult”.

Indeed, I found the case very difficult too!

In my view, if businesses are supposed to use case law to determine whether a person that they are engaging is employed or self-employed, it is a particularly inefficient system. In my experience, I don’t think I have seen a more convoluted case than Adams, in terms of the stages that had to be determined and gone through to establish employment status.