Kaye Adams wins IR35 trial

Once again, HMRC have failed to prove their stance against a celebrity. This time Kaye Adams has won her 9 year long IR35 case, despite this being HMRC’s fourth attempt to win the appeal against Atholl House Productions Limited, Kaye Adams’ limited company.

HMRC failed to show that they were correct in claiming her engagements with the BBC were caught by the Intermediaries Legislation (IR35). The fourth decision was made by Judge Tony Beare this week, upholding her appeal and confirming her self-employed status.

Kaye Adams is a regular on our screens and airwaves, having been an anchor on ITV’s Loose Women since 1999. She is also a regular panellist on The Wright Stuff, on Channel 5 and hosts the Morning Show on BBC Radio Scotland.

The Enquiry

HMRC’s initial enquiry was into Kaye Adams work at the BBC in July 2014, claiming that between tax years 2013/14 to 2016/17 she was employed directly by the BBC.

They subsequently dropped the claims for years 2013-15. She appealed to the tax tribunal and won in April 2019, but HMRC repeatedly refused to accept the decision, leading to three more hearings.

Nine years later, five different judges have heard the case, and none of the four tribunals hearings have concluded that HMRC was correct to claim that Ms Adams was a “deemed employee” with the BBC.

What is IR35?

IR35, also referred to as ‘intermediaries’ legislation, is a piece of tax legislation that aims to prevent disguised employment.

Disguised employment is where an individual such as a contractor provides their services through a limited company directly to an end client and the limited company is paid a fee for doing so. That income is then taken from the company in a way to minimise personal tax payable when in fact this should have been reported as salaried income.

Being ‘outside IR35’ is ideal for limited company contractors. As a contractor operating outside IR35, you are considered by HMRC to be genuinely self-employed, and not employed directly by the company you’re working for (in this case, the BBC).

Outside IR35, you receive gross payment for your services and are then responsible for paying your own tax and National Insurance liabilities directly to HMRC by way of self-assessment tax returns.

What are the key facts from the 9 year long Atholl House case?

–        There have been four separate tribunal hearings.

–        Judges told HMRC they were wrong on status three times previously.

–        The tribunal costs rose well above the tax at stake.

–        Kaye Adams often suffered “unbearable stress”.

–        HMRC’s estimated costs were around £250,000. The initial tax they were chasing was £70,000.

–       According to reports, HMRC solicitors tried to withhold costs payable to Atholl House as well as stop evidence from being heard.

–        HMRC tried to use her father’s hospitalisation to win their case, stating she only hadn’t worked certain hours due to visiting him.

According to professionals, it was never in doubt that Ms Adams operated in business on her own account and was not an employee of the BBC, which multiple judges agreed with.

The timeline of the case

Initial Enquiry – July 2014

The Atholl House case concerned a headline tax figure of £124,000, which would likely have been reduced to around £70,000 once taxes already paid were considered.

Like most businesses, Atholl House Productions Limited, owned by Kaye Adams, had tax investigation insurance, and she instructed advisors to defend the case.

After countless exchanges, HMRC refused to back down and Atholl House made an appeal application to the tax tribunal in March 2018.

First first-tier tribunal – April 2019

In 2019, the first two day hearing occurred, where Kaye Adams was represented pro-bono by barrister Rebecca Murray from Devereux Chambers.

The judge disagreed with the position put forward by HMRC’s barrister and legal team and ruled in favour of Atholl House, upholding the appeal.

HMRC refused to back down, claiming the tribunal judges had made errors in law. The tribunal granted permission for HMRC’s appeal to the Upper-tier tax tribunal.

Upper-tier tribunal – November 2020

HMRC used two barristers to argue their case with their legal team and the decision was released in February 2021 by the tribunal, which agreed that mistakes in law were made, but the judges reached the same conclusion as the First-tier tribunal. HMRC was still wrong.

HMRC was directed to pay Atholl House their legal costs of £61,000 but they tried to avoid paying in full and offered £15,000 claiming costs were “unreasonable and disproportionate.”

Kaye Adams then informed HMRC that she was holding evidence that HMRC had spent time defending a similar case, and would share the information with the tribunal.

HMRC immediately relented but offered £45,000, which Kaye Adams accepted rather than incur more costs through another tribunal for the shortcoming.

Despite winning for the second time, HMRC claimed further errors in law were made, and was granted permission to the Court of Appeal.

Court of Appeal – February 2022

Three judges heard the appeal and whilst they agreed some errors in law were made, they declined to pronounce on her status and remitted the case.

At this stage, Kaye Adams was forced to pay her own costs and HMRC’s costs, which was around £50,000.  She also had to return the £45,000 she’d been refunded before, despite still having never lost.

Atholl House had now spent around £95,000 defending a tax bill of £70,000.

First-tier tribunal – October 2023

At the fourth tribunal, each party paid their own costs.

It was heard over three days in October 2023, and this time HMRC fielded three barristers, backed up by a team of lawyers and HMRC staff.

HMRC suggested early on that if the judge disagreed with their view, he should make a ruling, adjourn the case, and allow HMRC to appeal the interim ruling, which would delay the case further. This led Judge Beare to decide to hear the entire case and explore the different opinions in his decision.

Judge Beare released his decision on 29th November 2023. He indicated that the appeal was again upheld in favour of Atholl House Productions Limited.

To date, HMRC has spent around £250,000 of taxpayers money on this case, to chase an initial net tax bill of £70,000.

The reasoning for this can be found in the HMRC’s Litigation and Settlement Strategy, which states “HMRC seeks to secure the best practicable return for the Exchequer…The objective of securing the best practicable return for the Exchequer requires consideration of not only the tax at stake in the dispute itself but also – in circumstances where a precedent may be set, or where HMRC is seeking to influence customer behaviour – potential tax liabilities of the same or other customers.”

What’s next for the case?

HMRC has 56 days to submit permission to appeal or to accept the tribunal’s decision.

Whether HMRC will appeal or not is yet to be seen, but given the rules associated, it doesn’t look like there are any options to do so as The Court of Appeal has already resolved all the previous errors in law, and HMRC does not argue cases based on the facts.

How does this impact other IR35 tribunal cases?

In 2022, whilst awaiting the outcome of the Atholl House Court of Appeal ruling, HMRC said: “If we were to lose that case, I do think it has some wider implications in terms of, especially, those who are portfolio earners.”

With other cases ongoing involving portfolio workers, HMRC will likely reflect on the outcome and establish whether the cases still warrant spending so much of the taxpayer’s money.

IR35 & Contractors

As a contractor you should ensure you are always aware of whether you are operating inside or outside IR35 to ensure that your tax affairs are in order, both in terms of compliance and optimisation to take the necessary steps to help your business thrive.

We understand that it’s not always easy to determine whether your contracts lie inside or outside IR35. With grey areas in the rules and so many factors to consider, contractors often seek specialist help to determine their position.

If you’re concerned about your contractor IR35 status, contact us today on 0330 107 9673 or request a call back here to speak to an expert IR35 accountant.