BBC presenter loses IR35 case owing £419,000
A BBC presenter has been found inside IR35, saddling her with what experts sympathised last night is a “life-changing” tax debt of almost half a million pounds.
Christa Ackroyd, a ‘Look North’ presenter, must pay £419,151 in tax and NICs, as she was a PSC but “effectively [had] a full-time job” under the BBC’s control from 2006/7 to 2012/13.
This is despite "no evidence of examples where they exercised such control,” nor her having statutory rights; a line manager, appraisals or even her own desk, a FTT judgment says.
'Control'
As ‘CAM Ltd,’ her IR35 appeal heard that she had a small number of clients including the Sunday Express newspaper; provided her own equipment and regularly worked from home.
A ‘guarantee’ of “independence” and “control” issued by the BBC (which encouraged her to use the PSC in the first place) solidified her belief that she had ‘control’ over her own editorial output.
Seeming to prove the point, during a live on-air news programme she chose not to use a word in her script (“prostitutes”), and the BBC effectively deferred to her view.
'Ultimate arbiter'
But this represents “the only example in 13 years at the BBC when Ms Ackroyd felt so strongly about something that she insisted her voice should prevail,” the tribunal said.
Whenever she worked, a BBC editor decided which stories were covered and in what order. She had room to disagree, but the BBC was “the ultimate arbiter,” her accountant unhelpfully conceded to HMRC.
“We do not accept that Ms Ackroyd did have day to day editorial control over her work. That would have been inconsistent with clause 5 of the contract,” the tribunal decided.
'Economically dependent'
It also decided that she was not ‘in business on her own account’ as she was “economically dependent” on the BBC, as it took up almost all of her working time in the probed period -- when she was in her fifties.
Her hours were logged by the corporation (without her knowledge); they imposed restrictions on her non-BBC work and they decided the people she interviewed for broadcast. They also vetoed any right of substitution.
Two other classic IR35 status factors that went against her (on top of ‘Control’ and ‘Substitution’) were ‘Mutuality’ (found to be present) and, always of lesser clout ‘Financial Risk.’
“She performed professional services but she did not profit from sound management of a business nor did she take any financial risk,” the tribunal’s judgment says.
“It was not realistically possible for Ms Ackroyd to make a loss in performing the contract...[although conversely] she could increase her income by way of....[a] 'success' fee [of £15,000 a year].”
'No real argument'
IR35 advisory Abbey Tax reflected to ContractorUK: “Ackroyd had no real argument on any of the three big issues of Mutuality of Obligation, Control and Personal Service.
“[Her] contract could have been written better, in a bespoke fashion… [and] whilst not a major factor, the seven-year length of her contract did not help either.”
Also what potentially didn’t’ help was the appellant herself -- a successful journalist (she became the UK's first female radio news editor in 1981), before she turned to regional TV presenting.
'Inconsistencies'
Quite apart from “inconsistences” between her oral and written evidence, she was described by the judges as being “more concerned with understanding where the line of questioning was going, than in giving direct answers”.
Known to be ill-advised in an IR35 enquiry situation, the evasiveness was ‘not deliberate’ in the eyes of the two ruling judges, but it did appear to bring the ‘reliability of her evidence’ into question.
An explanation was hinted at -- on top of the one cited that; as a media professional, Ackroyd was more comfortable with interviewing others than being interviewed herself.
'Scapegoat'
“[She] has a genuine belief that towards the end of the contract between CAM Ltd and the BBC she was victimised by the BBC and made a scapegoat”, the judges reported.
[This belief of hers emerged] following an internal inquiry into the BBC’s use of ‘freelancers,’” they added. “She clearly now has a deep mistrust of the BBC”.
It’s not the only genuine belief that the veteran presenter, now aged 60, vocalised in the dock.
“As I’ve said before, the vast majority of taxpayers don’t deliberately ignore or try to circumvent IR35”, says former tax inspector Carolyn Walsh, reflecting on Ackroyd’s submissions to the tribunal.
“It’s just that -- [like Ackroyd], they genuinely believe it doesn’t apply to them. That used to be partly the fault of [some] contractor accountants who grew large selling services backed by ‘bomb-proof’ IR35 contracts.
“But this practise seems to have died out. So now the issue must be with HMRC and its inability to get the message across”.
'Sledgehammer to crack a nut'
The Association of Independent Professionals and the Self-Employed (IPSE) takes the opposite view.
It believes the case is proof that HMRC can indeed get its ‘disguised employment’ message across -- without having to reform IR35 any further.
“[This ruling] shows that the original IR35 legislation….can be made to work when HMRC actually enforce it”, it said, adding -- whereas the floated “drive to push all the liability onto the client from the outset is like using a sledgehammer to crack a nut.”
'Diametrically opposed'
And worryingly, clients -- the BBC in this case, often have a “diametrically opposed” view to their PSCs on the relationship that exists between contractors and themselves as the engager, says Walsh.
Another former Revenue inspector Nigel Nordone, now Abbey Tax’s status specialist says the case's key lesson for contractors is to get their contracts reviewed “before entering” them.
But that’s not to imply any criticism of Ackroyd. The judges Jonathan Cannan and Nigel Collard agree. “We do not criticise Ms Ackroyd for not realising that the IR35 legislation was engaged.
“She took professional advice in relation to the contractual arrangements with the BBC and she was encouraged by the BBC to contract through a personal service company.”
Yet they also wrote: “The most significant factors in the present case include the fact that the BBC could control what work Ms Ackroyd did pursuant to the hypothetical contract. It was a 7 year contract for what was effectively a full time job.”
'Life-changing'
Now an accountant, Ms Walsh summed up: “The opinion [of the judges] fell in with that of HMRC.
"So that is it for the contractor [who has] racked up a life-changing tax and NI debt while obviously believing herself to be an independent contractor and having faith in the contract between herself and the BBC.”
Martyn Valentine, founder of IR35 lawyers The Law Place hinted it was a faith that got exploited.
He told ContractorUK: “The BBC does not emerge unscathed [here], as it bears moral responsibility for encouraging Ms Ackroyd to use a personal service company for its own commercial advantage.”
“[The corporation did this] in the context of a contract and working practices which overwhelmingly confirm that IR35 should have applied from the outset.”