Kaye Adams vindicated as outside IR35, solely thanks to being ‘in business on her own account’

Kaye Adams has again been ruled outside IR35 due to ‘In Business On Your own Account’ trumping Control and Mutuality, in a case PSCs will embrace but which won’t apply widely.

In fact, despite welcoming the ruling in favour of the TV host, a status expert, a contractor accountant, an ex-tax officer and an IR35 reviewer all cautioned ContractorUK about its applicability.  

'Unusual case, which had a killer blow'

The expert, Kate Cottrell, described HMRC Vs Atholl House Productions Ltd  an “unusual case,” because it creates case law precedent but will mainly help “the famous,” thereby being “not of much use to contractors in general.”

The contractor accountant, Helen Christopher, said Ms Adams’ in-business factors outweighing mutuality, control and personal service, “could be” significant, albeit only “on the face of it.”

The ex-tax officer, Carolyn Walsh, said the “killer blow” against HMRC was the Loose Women presenter’s 20 years’ industry experience on a freelance basis – a strike that only veteran contractors can potentially land.

And the IR35 reviewer, Seb Maley, whose firm runs contract reviews for PSCs, was even more explicit, saying plainly: “Adams’ engagement was vastly different from most contractors.”

'Looking at the whole picture'

But all four advisers expressed no reservation about what swung the IR35 case for the 58-year-old, whose status for contracts with BBC Radio Scotland in 2015/16 and 2016/17 was challenged by HMRC.

Perhaps a fifth IR35 adviser, Rebecca Seeley Harris, sums up the assessment of the four best. “Standing back and looking at the whole picture, the Upper Tribunal found that Kaye Adams had tended to carry on her profession as an independent contractor rather than as an employee.”

“[So] although the first two tests of control and mutuality…were satisfied,” she said, “the third test  -- where the court determines whether under the hypothetical contract Ms Adams would have been an employee of the BBC, was not.”

'Significant control, sufficient mutuality'

In his ruling, judge Jonathan Richards explains that despite her legal representative failing to convince him that the BBC’s “editorial control” over Ms Adams was not “significant,” and despite “sufficient” mutuality between her and the BBC not being contested by the representative, the judge effectively said ‘IBOYA’ mattered more.

“Given the conclusions we have reached on ‘mutuality’ and ‘control,’ the prima facie conclusion is that, under the hypothetical contract, Ms Adams would have been an employee of the BBC,” judge Richards began.

“[Yet ruling on Ms Adams’ IR35 status previously] the FTT found…that over her career, Ms Adams had tended to carry out a profession on her own account. HMRC criticise this finding as ‘impressionistic,’ but we do not accept that criticism.

“Therefore, we consider that the prima facie conclusion…is to be displaced because, when entering into the hypothetical contracts here at issue, Ms Adams would have been entering into business on her own account.”

'Impressions versus reality'

Formerly of the tax authority but now boss at Andraste Accounting, Ms Walsh reflected: “The Adams case at the UT was all about ‘impressions versus reality’ -- of both the contract and what it means to be in the business of being a professional freelancer.

“HMRC’s view was tethered to case law, while Kaye Adams believed she was a genuine freelancer, based on both her own view and on a prevailing impression of what that means.

“On the whole, the UT agreed with HMRC’s view on how case law applied in this case. But it then stood back, looked at the whole picture, and overall decided that Adams’ impression was probably correct. In the end, a point of law overlooked by HMRC simply prevailed.”

'HMRC will likely stick with its approach to IBOYA'

At IR35 advisory Bauer & Cottrell (B&C), the plan is to continue to use ‘IBOYA’ in IR35 defence cases, even though HMRC invariably sidesteps the argument.

“Without exception HMRC always claims that they are not saying that the person [who it is investigating under IR35] is not IBOYA -- only that IR35 applies to their engagement.

“We suspect that, despite the Adams ruling, HMRC will stick with their approach,” the advisory says.

“The judge found [Ms Adams] outside IR35 purely on the ground she was in business on her own account,” added Orange Genie, where Ms Christopher is operations director.

'Three-stage approach to determining IR35 status'

“It appears that the tribunal accepted that over her ‘professional career generally,’ Ms Adams had tended to carry on her profession as an independent contractor rather than an employee.  

“[So here, we have a] three-stage approach to determining IR35 status…[whereby] how a contractor operated as a business in its own account can be enough to outweigh both stages one and two, which each look at the contract.”

At status review firm Qdos, Mr Maley, its CEO confirmed: “The [Adams] case shows how important it is that all factors are taken into account when determining IR35 status -- factors like having multiple clients, which status can evidently hinge on.”

It is as partly a result that contractors “particularly in the media industry” will now be watching to see if HMRC will appeal the decision, believes Orange Genie’s Ms Christopher.

'Taxman carefully considering the outcome'

A Revenue spokesman hinted yesterday that the taxman is yet to decide if he has the stomach to fight Ms Adams again, in what would be his third IR35 battle against her after already losing twice, successively.

The HMRC spokesman said: “HMRC is disappointed that the Upper Tribunal has decided that the intermediary rules, also known as IR35, do not apply in this case. [We] will carefully consider the outcome of the tribunal before deciding whether or not to appeal.”

In the meantime, B&C advised: “The message for contractors is that ‘IBOYA’ has risen in importance and contractors should ensure that they have the ‘badges of business’ in place -- the costs and risks of running a business such as having insurances, possibly a website and also running the risks of invoicing and bad debts, for example.

Contractors should act at all times as a business representing themselves, working and demonstrating themselves to be as a stand-alone business rather than being someone turning up to undertake a task or fill a role.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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