Adams has been a freelance journalist for more than 20 years, providing her services, through her PSC to a wide variety of media organisations, including the BBC. She is best known for her role in ITV's 'Loose Women' programme but the dispute with HMRC arose from her presentation of a BBC Scotland radio phone-in.
She began that role in 2010 and she has worked for the BBC since then, although the number of weekly programmes and the duration of those programmes have fluctuated. She provided her services under a series of agreements between the BBC and her PSC, each of which had a term of around one year.
As Adams was providing services to the BBC through a PSC, the intermediaries' legislation, known as IR35 potentially applied. This meant that the PSC would have to account for employment taxes if, as HMRC claimed, Adams would have been regarded as an employee of the BBC if she had contracted directly with the BBC rather than being engaged through the PSC.
Each written agreement between the PSC and the BBC specified that the BBC had first call on Adams’s time during the term of the agreement and that Adams was required to obtain the BBC’s permission in advance of entering into any other engagements. However, the tribunal accepted the evidence of Adams and the BBC producer of her programme that this was not the case in practice. It found that the written agreements did not reflect the terms of the actual agreement between the BBC and Adams.
The BBC never sought to place any restrictions on her work for others and it was at all times understood by the BBC that she would continue to carry on with her other engagements without seeking the BBC’s permission. In fact, the BBC would often go out of its way to help her to fulfil her other engagements by allowing her to present her programme from an alternative location.
The tribunal said that although the BBC had an element of control over the way in which Adams performed her services; that control did not extend to the nature of Adams’s other engagements or, except to the extent that such content could damage the BBC, the content of other engagements.
The tribunal said that this level of control over Adams’s other activities was not a significant factor in deciding whether Adams would have been an employer if engaged directly by the BBC, because it was perfectly natural for an organisation entering into a significant contract with an independent contractor to want to ensure that the contractor in question does not do anything which might cause harm to the organisation.
The judge said there were a number of other features of the agreements which were not consistent with the contracts being employment contracts. In particular, Adams had no entitlement to use BBC equipment except when she was in the studio or presenting programmes outside the studio and she was not entitled to any holiday or sick pay, maternity leave or a pension entitlement.
The tribunal pointed out that Adams was also treated differently from the BBC’s employees as she did not have an annual, or indeed, any, review and she was not subject to the formal processes within the BBC in relation to any changes in the nature of her work for the BBC.
It said that the fact that the BBC had the contractual right to ask Adams to attend editorial training and to undergo a full medical was consistent with there being a contract of service, but the tribunal said that the fact that the BBC never exercised either right showed that essentially, Ms Adams was not seen as being “part of the organisation” but instead as an external services provider.
"In summary, we consider that, when one stands back from the detail and considers the whole picture in this case … that picture is one which leads us to conclude that each hypothetical contract between the BBC and Ms Adams was a contract for services and did not give rise to a relationship of employer and employee," the tribunal said.
"Whilst this decision is not a surprise given the facts of the case, it is nonetheless a reminder that HMRC will pursue IR35 cases even where the fact pattern does not obviously suggest employment," said Chris Thomas, an employment tax expert at Pinsent Masons, the law firm behind Out-law.com.
Last year the first–tier tribunal decided that former BBC television presenter Christina Ackroyd would have been an employee if engaged directly by the BBC rather than through a PSC, meaning that the PSC was liable to account for tax under IR35.
In the Kaye Adams case the tribunal said that there were significant differences in the facts of the two cases. In Ackroyd, the contract between the BBC and Ackroyd’s service company was seven years’ long and it followed a contract which was 5 years’ long. In contrast, each contract in the Adams case was for approximately one year.
The ratio of Ackroyd’s non-BBC income to Ackroyd’s BBC income was materially different from the comparable ratio in relation to Adams. Ackroyd’s non-BBC income was effectively de minimis whereas Adams derived around 30% of her income from other sources. In addition, Ackroyd was given a clothing allowance whereas no such allowance was made to Adams.
The BBC had first call on Ackroyd’s time, Ackroyd attended BBC training sessions and Ackroyd could be told by the BBC whom she was interviewing. The tribunal said that none of these features was present in the relationship between the BBC and Adams.
Ackroyd was required to obtain the consent of the BBC for her non-BBC engagements whereas the tribunal found as a fact that, notwithstanding the terms of each written agreement, each actual agreement between the BBC and the PSC did not require Adams to seek the consent of the BBC before accepting other engagements.
Last month a tribunal found that the IR35 rules did not apply to a PSC providing the services of ITV presenter Lorraine Kelly. The tribunal said that the services Kelly provided for ITV were the equivalent of those of a 'theatrical artist', who did not "appear as herself" but rather as "a persona of herself … the act being to perform the role of a friendly, chatty and fun personality".
"From April 2020 it will be the ultimate engaged which has the responsibility to make the determination and ensure that PAYE is accounted for where appropriate. HMRC has already put engagers on notice that they need to be carrying out risk assessments and preparing for the new regime and engagers cannot expect any leniency when the new rules come in - they need to be taking steps now to put robust procedures in place," Chris Thomas said.
From April 2020, the government intends that private sector businesses will be liable for compliance with IR35 by their contractors who work through PSCs. This would reflect the position of public sector engagers, which have been responsible for ensuring compliance since a change to the law in April 2017. The government is currently consulting on how the rules will operate once they are extended to the private sector.