Kaye Adams wins her HMRC battle

You may remember towards the end of last year, we wrote a blog post about Kaye Adams and her case against HMRC, which you can read here.

Many of you will be aware of the case – it has been going on for the last 10 years after all. Kaye Adams, a regular anchor on ITV’s Loose Women, panellist on The Wright Stuff and host of the Morning Show on BBC Radio Scotland, has been fighting the enquiry against her limited company Atholl House Productions.

After the last tribunal, in which HMRC failed to show that they were correct in claiming her engagements with the BBC were caught by the Intermediaries Legislation (IR35), the Judge upheld Kaye Adams’ appeal and confirmed her self-employed status.

HMRC was then given 56 days to submit permission to appeal or to accept the tribunal’s decision. After four hearings and 10 years of torment, HMRC has finally given up after wrongly issuing Kaye Adams with a tax bill under the IR35 legislation, with just one day to go, claiming it would not be “proportionate” to continue.

What happened in the last tribunal?

HMRC failed to convince judges that Kaye Adams owed them money in the last tribunal. This had been the fourth attempt in October 2023, with three barristers fighting their corner.

To start out with, the Kaye Adams case was fairly straightforward. Since then:

  • There have been four separate tribunal hearings.
  • Judges told HMRC they were wrong on Kaye Adams IR35 status three times previously.
  • The tribunal costs rose well above the tax at stake.
  • HMRC’s estimated costs were around £250,000.
  • The initial tax they were chasing was £70,000.

One fact that was highlighted by the Court of Appeal was that it was “myopic” to ignore the fact Kaye Adams was running her own business, and that “the fact that the person providing the work has an established career as a freelance” should be taken into account.

Now, HMRC have finally admitted defeat.

Kaye Adams’ Full Statement to ContractorCalculator is below:

“Whilst I am extremely pleased that HMRC has decided not to roll the dice on a fifth time lucky shot on my case, I remain utterly horrified at the behaviour of this department. The statement they released to the press, without my knowledge, twenty minutes after informing me of their decision, says they don’t think it would be ‘proportionate’ to appeal in this case.

“It was never proportionate.

“By the end of my first hearing five years ago, I had burned through more money in legal fees than the tax in dispute. Where was HMRC’s concern over proportionality when they appealed to Upper Tribunal and then appealed again to the Court of Appeal and then again hauled me over the coals in the First Tier Tribunal for a second time?

“Not once did they score a victory over me, yet they kept going. And now they have the audacity to suggest, my case does not set legal binding precedent. It is outrageous.

“Everyone in the media industry knows IR35 is a mess. Freelancers working for as few as ten days a year for engagers are being forced onto PAYE with no employment rights or benefits, HMRC knows IR35 is a mess. It knows it has been playing fast and loose with taxpayers’ money to push through an interpretation of the law that it has frankly invented and it seems these faceless bureaucrats are accountable to no one.

“They have the power to ruin good, honest hard-working people’s lives with no consequences.

“It is not just lives they are trashing, HMRC is making a mockery of the legislation. Self- employed status is now determined according to the pressure applied by HMRC and risk management on the part of media companies, not according to the law.

“This is a pyrrhic victory for me. I have won my case against HMRC and I have spent on legal fees nearly £300,000, which should have been in my pension. Justice eh!”

IR35 Changes: What’s next?

With the Atholl House case now over and HMRC dropping their investigations against Kaye Adams, HMRC are still appealing four other cases in which they have lost. Whether they appeal again is yet to be seen.

When portfolio workers like Kaye Adams are assessed by HMRC, parties need to follow legally binding principles which were set out in this case. If you’re working as a contractor outside IR35, you need to be clued up on your contracts to make sure there are no issues with HMRC.

To ensure you follow the rules by the book and classify your contracts correctly, it’s a good idea to understand the indicators of being outside IR35.

  • Work on clearly defined projects with clear goals and deadlines, not rolling contracts. If you have an ongoing relationship with a company, then you should treat it as a series of individual projects rather than working as an employee. Mutuality of Obligation means there should be no expectation of further work once a contract is complete.
  • Without a fixed deliverable or deadline, your contract may fall within IR35.
  • The length of the job is a factor, but it is not determinative – there are no hard and fast rules on percentages of work in one contract and the available time you have to work for other clients.
  • You should not have any employee perks, such as paid holiday, sick pay or healthcare. On top of this, you should not take advantage of perks like gym memberships, cycle to work schemes or Christmas parties.
  • Your client should have no control over the service you provide in terms of the location you work from, your hours or how you deliver the project. You should also have no access to internal comms, no company email address and no access to an intranet or other software used by the company.
  • If you’re not allowed to provide a substitute to work on the contract if you’re unable to work, HMRC would consider this to be an indicator of a contract of employment and you’d be inside IR35. The right of substitution means that the service could be delivered by an employee of your business other than yourself and is an indicator that your contract falls outside IR35.
  • Always keep records detailing your contracts, activities and paperwork, should you need it to back a case for being outside IR35, at least for the last 6 years of your work. You will need a full history of records should HMRC investigate you and your work, and this can help in any dispute. HMRC can investigate up to 6 years later.
  • It’s a good idea to get your contracts and working practices reviewed by an expert in IR35 to ensure you’re working in the correct way. Negotiate any changes if necessary and get a confirmation of arrangements documented. At Gorilla, we partner with Qdos to provide expert IR35 contract reviews.

Working with Gorilla Accounting

As a contractor you always need to be aware if you’re operating inside or outside IR35 to ensure that your tax affairs are in order, both in terms of compliance and optimisation. However, it’s not always easy to determine whether your contracts lie inside or outside IR35 and the tax legislation around IR35 rules.

If you’re concerned about your contractor IR35 status, and you’re looking for an accountant that you can trust with your tax and national insurance contributions, contact us today to speak to an expert IR35 accountant.