HM Revenue & Customs has lost its appeal against TV presenter Kaye Adams after the Upper Tribunal ruled that she was not an employee and therefore certain tax rules do not apply.
The Upper Tribunal upheld the original decision, made by the First Tier Tribunal in 2019, which found Adams was outside the scope of IR35 legislation
In 2019, Adams successfully appealed HMRC’s challenge to her self-employed status that spanned her engagement with the BBC as presenter of ‘The Kaye Adams Programme’ during the 2015-16 and 2016-17 tax years.
IR35, first introduced in 2000 by then-chancellor Gordon Brown, 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.
According to some commentators, this case could now provide comfort to other media-based freelancers who are currently on HMRC’s radar.
It was the array of work undertaken by Adams that led to the Upper Tribunal concluding she was not employed.
Dave Chaplin, chief executive at IR35 Shield and ContractorCalculator, noted that the circumstances under which Adams was found to be outside the scope of IR35 were “far from ordinary” and could “prove problematic” for HMRC as it pursues similar cases.
He said the decision could undermine the approach to adopting employment status applied by both HMRC and its Check Employment Status for Tax (CEST) tool.
Chaplin said: “Adams was found to be providing personal service, mutual obligations were satisfied and there was a sufficient framework of control.
“CEST would – and indeed HMRC did – have no doubt that Adams was caught by IR35.
“Yet she was found by the Upper Tribunal to be ‘outside IR35’ purely on the grounds that she was in business on her own account.”
Seb Maley, chief executive at Qdos, said the ruling shows businesses that there is no need to make “risk-averse decisions in response to IR35 reform”.
He added: “The case also demonstrates the importance of taking all factors into account when deciding IR35 status - factors such as having multiple clients, which status can evidently hinge on.
“While HMRC losing an IR35 case is nothing unusual, that the taxman was willing to go the distance indicates the government’s determination to record a high profile victory as we close in on IR35 reform.”
A HMRC spokesperson said: “HMRC is disappointed that the Upper Tribunal has decided that the intermediary rules, also known as IR35, do not apply in this case.
“HMRC will carefully consider the outcome of the tribunal before deciding whether or not to appeal.”
Earlier this month (February 15) the tax authority reaffirmed its commitment to a 'light touch' approach to IR35 penalties in the first year of the controversial rule changes.
It said it would not open a new compliance enquiry into returns for tax years before 2021-22 using information acquired as a result of the changes to the off-payroll working rules, unless it suspected fraud or criminal behaviour.