Ms Ackroyd, a professional journalist and broadcaster, provided her services to the BBC between 2001 and 2013. Rather than contracting as an employee of the BBC, Ms Ackroyd delivered her services via a PSC, Christa Ackroyd Media Limited ("CAML"). This meant that the BBC was not required to provide her with the benefits of employment and that Ms Ackroyd would be treated as self-employed. The arrangement resulted in lower tax liabilities.
In assessing the correct tax treatment under IR35, the fact an individual is supplying their services through a PSC is disregarded. The relevant question on this case was therefore: If Christa Ackroyd had provided her services under a contract directly between herself and the BBC, would she be regarded as an employee of the BBC? If so then CAML would have needed to treat Christa Ackroyd as an employee for tax purposes.
HMRC determined that under a hypothetical contract between the BBC and Christa Ackroyd then she would have been an employee of the BBC and issued CAML with determinations and decisions in relation to the contract totalling almost £420,000. CAML then appealed those findings to the Tribunal.
The Tribunal found in favour of HMRC. In assessing the key questions of employment status:
- It was not in dispute that there was mutuality of obligation as Ms Ackroyd was required to work for the BBC for 225 days per year and the BBC were required to pay fees for that work.
- It was not in dispute that Ms Ackroyd had to provide her own services. She could not provide a substitute.
- Control was considered by the Tribunal to be a significant factor. Whilst it was accepted that Ms Ackroyd enjoyed a high level of autonomy (including Ms Ackroyd’s ability to ad lib in a live news environment) the Tribunal assessed that the BBC possessed a genuine contractual right to control or restrict Ms Ackroyd’s activities, even if, in practice, they chose not to exercise those rights. It was specifically noted that the contract provided the BBC with a clear contractual entitlement to direct Ms Ackroyd’s work and to restrict other external professional activities.
- The Tribunal also noted that Ms Ackroyd was “economically dependent” on the BBC contract and that it took up most of her working time, being directly equivalent to a full-time job. The length of the contract (7 years), was significantly longer than most comparable contracts offered by the BBC, was also indicative of an employment contract.
This case is the first in a series of appeals to be heard by the first tier tribunal (Tax Chamber). HMRC has taken a close interest in BBC presenters working through personal services companies and opened at least 100 investigations numerous of which have been appealed. As a body which is subject to the Freedom of Information regulations, the BBC is subject to the regulations focusing on off-payroll working in the public sector.
Whilst the Tribunal gives a sympathetic nod towards Ms Ackroyd at the end of the judgment, confirming that she should not be criticised for failing to realise that IR35 was engaged. She had taken appropriate professional advice and the BBC had also encouraged her to use the structure.
The case does, however, act as an important reminder that employment status is a matter of fact, not choice and highlights the importance of taking expert advice when dealing with PSCs. These types of arrangements can pose reputational risk to businesses as well as significant financial risk to contractors.
Authored by Freya Gibb, Jon Keeble and Caroline Colliston