TaxOct 28 2019

TV presenter faces £400k tax bill after losing IR35 appeal

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TV presenter faces £400k tax bill after losing IR35 appeal

Former BBC presenter Christa Ackroyd has lost her appeal against HM Revenue & Customs making her liable for more than £400,000 in outstanding tax under IR35 legislation.

In a decision published on Friday (October 25), the Upper Tribunal tax and chancery chamber dismissed Ms Ackroyd’s appeal, who was looking to overturn a previous decision of a first tier tribunal in February 2018, which stated she had to pay nearly £420,000 in outstanding tax.

Ms Ackroyd was employed through Christa Ackroyd Media to present Look North on BBC1 until the contract with the company was terminated in 2013.

HMRC claimed Ms Ackroyd's status was that of an employee, and that therefore CAM should pay tax and national insurance. But she claimed she was a self-employed contractor.

In his ruling at the time, Judge Jonathan Cannan said: “In our view the most significant factors in the present case include the fact that the BBC could control what work Ms Ackroyd did pursuant to the hypothetical contract. It was a seven-year contract for what was effectively a full-time job.

“Standing back and making an overall qualitative assessment of the circumstances we consider that Ms Ackroyd was an employee under the hypothetical contract.”

In the latest ruling Mr Justice Mann and Judge Thomas Scott sided with the tribunal and dismissed the appeal.

This is not the first time courts have sided with the taxman over claims of BBC presenters who have breached IR35 legislation, with a similar decision out last month.

IR35 is an anti-tax-avoidance rule that applies to all contractors and freelancers who don’t fall under HMRC’s definition of being self-employed.

It is designed to crack down on workers supplying their services to clients through an intermediary, such as a limited company, but who would be an employee if the intermediary was not used.

It was first introduced in 2000 by then-chancellor Gordon Brown to crack down on self-employed contractors who were paying themselves through dividends from their own limited companies.

According to Julia Kermode, chief executive of The Freelancer & Contractor Services Association, Ms Ackroyd's case highlighted a debate that had been running for some years, but overlooked the many genuine self-employed freelancers and contractors who have chosen to work for themselves in line with current and correct tax legislation.

She said: “It is another example that highlights just how complex employment status is and is further evidence that the government cannot expect businesses in the private sector to be held responsible for assessing the IR35 status of those freelancers and contractors they engage.

“However, this is precisely what the government is planning to do when it extends the new off-payroll reforms to the private sector next year."

From April 2020, every medium and large private sector business in the UK will become responsible for setting the tax status – or IR35 – of any contract worker they use.

The extension of the off-payroll working rules to the private sector will will seek to ensure that contractors such as IT and management consultants who work through their own company but are in practice deemed as employed by a third party, pay the right tax as employees.

Tax experts have previously said IR35 can reduce a worker’s net income by up to 25 per cent, costing the typical limited company contractor thousands of pounds in additional income tax and national insurance contributions.

Ms Kermode said: “HMRC cannot run rough shod over the freelance sector and penalise everyone working through limited companies in blanket fashion and assume that all these individuals are tax avoiders. 

“These are the very individuals who bring much needed flexibility to the businesses that engage them on a short-term basis, and, in times of economic uncertainty which our country is facing right now, firms need that flexible option.”

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