What the BBC presenters’ IR35 case really means for limited company contractors
It was not just any IR35 case. It was the BBC’s IR35 case. No, not a well-known retailer advertising the latest IR35 victory but it’s the truth and possibly how limited company contractors will come to describe it.
And despite being far from an average IR35 case, writes Seb Maley, CEO of Qdos Contractor, the contents of the FTT judgment in Paye Limited & Others V HMRC, including what lost it for the taxpayers, have been massively, mysteriously underreported.
The BBC case: what happened
Let’s back up a bit. A fortnight ago, a First-Tier Tribunal judgement showed that HMRC defeated three BBC presenters in an IR35 case, with the eventual verdict -- which had to be decided on a casting vote after a split decision -- finding that the individuals in question had been wrongly working outside IR35 on a number of contracts.
Despite not being able to agree with each other with regards to the correct IR35 status of these presenters, the FTT judges did decide that the BBC had ‘forced’ (see page 157 of the judgment) Joanna Gosling, David Eades and Tim Willcox into working as contractors, through Personal Service Companies. As a result, the broadcaster has said it is willing to “help” the presenters pay the settlement, ranging from a reported £200,000 and £300,000.
The BBC IR35 case is a one-off
But as outlined at the outset, this wasn’t your average IR35 case. While a client encouraging an individual to work as a contractor for its own financial benefit is nothing new, I can’t recall a situation where the engager has decided to help the individual out when they have been found guilty of non-compliance under the Intermediaries legislation. Then again, the BBC is very much in the public eye and you might argue that it has no real choice but to help out, financially. Compounded by the fact that some experts have said that the BBC has got a moral responsibility to.
Much has been made about the case, given that around 100 other presenters engaged by the broadcaster are currently having their IR35 status scrutinised by HMRC. These individuals are no doubt wondering if this is a sign of things to come. Will this case set a precedent? Perhaps. Although I should stress that each engagement must be considered on its own merit.
As you might have noticed since the case judgment broke, less has been made about the specific details of the tribunal’s decision. Where, precisely, was it won and lost? Which factors played a part in its outcome? These are key questions worth trying to answer.
‘Sufficient mutuality’ existed
Judge Harriet Morgan, who ultimately decided the outcome of the tribunal on a casting vote, said there was “sufficient mutuality” in the engagements to place the “relationships between the BBC and the presenters in the employment field.”
In other words, Mutuality of Obligation (MoO) existed to the extent where there was an obligation for these presenters to carry out their services, with the BBC obliged to provide paid for work.
There are varying degrees of MoO and it has been present in other IR35 cases but where the individual has been found to be outside the legislation. However, in this scenario, judge Morgan was of the opinion that this important aspect of IR35 case law existed to an irreducible minimum.
BBC had ‘ultimate control’
In her statement, Judge Morgan also spoke of the “ultimate control” that the BBC had over the “presenters’ work”, making it clear that she thought these individuals were working under the broadcaster’s direct Control, meaning they belonged inside IR35.
The control exerted by the BBC meant that the presenters were restricted to working only with the broadcaster. In the 180-page judgement, it was considered "particularly significant that the BBC had the right to prevent the presenters from presenting for any other broadcaster, including as regards news reporting. The reality was that the BBC would not give permission for the presenters to work on news programmes for other broadcasters."
‘Obliged to provide services personally’
As is often the case with presenters where a programme relies on the presence of a specific individual, these presenters didn’t have the right to provide a substitute.
The case notes explained that the presenters “were contractually obliged to provide their services personally.
“The very limited rights to subcontract or substitute in the terms and the practice of swapping shifts with other presenters does not detract from the existence of this obligation but on the contrary serves to emphasise its importance.”
No easy win, no ordinary case
While it seems the majority -- although not all -- of the presenters’ contracts had the characteristics of inside IR35 engagements, that’s not to say this was an easy win for the taxman. The split decision alone reflects that.
Taking into account the complexities of IR35, which still (nearly two decades after its introduction) confuses the courts, this case highlights how important it is that contractors take compliance seriously, regardless of the fact that private sector IR35 reform will result in clients being made responsible for administering the rules from April 2020.
It also highlights just how unique a scenario the case of the BBC three was. It’s got some totally unseen-before characteristics -- so much so that the actual deciders in the case – what swung it – have been under-analysed. Underreported. Ironic, perhaps, considering that the case involved news reporting giant, the BBC. But only under-analysed until now. Herein, contractors finally have some guidance on what led to the presenters' ‘IR35-caught’ determination, but the uniqueness of the working practices, the engager's conduct and commitments, and the tribunal’s treatment of the case should not be understated.