Last month, the First-Tier Tax Tribunal (FTT) held that IR35 applied to three BBC presenters who provided services through their personal service companies. The Upper Tribunal has now dismissed an appeal against another decision of the FTT.
Ms Ackroyd presented 'Look North' on BBC 1 until 2013. She was engaged to provide presenting services through her company, Christa Ackroyd Media Ltd, under a fixed term contract. The arrangements lasted seven years and required Ms Ackroyd to personally provide services 225 days a year. The FTT found that this pointed towards a contract of employment for tax purposes.
The aspects of the relationship between Ms Ackroyd and the BBC which the FTT found relevant were:
The Upper Tribunal considered the FTT's decision and found that the FTT had made no errors of law in concluding that the BBC had sufficient control over Ms Ackroyd to mean that an employment relationship would have arisen if the services had been directly supplied. Christa Ackroyd Media Ltd was therefore liable to settle the unpaid tax bill.
In April 2017, there were changes to the IR35 regime in the public sector. The reforms shifted the responsibility for determining the status of contractors providing services through their personal service company onto the public sector organisation as the end user.
If a contractor is deemed to be within the IR35 regime, then the public sector organisation is required to deduct income tax and National Insurance as they would for employees. Failure to do so could make them (rather than the personal service company) liable for any unpaid taxes interest and penalties.
From April 2021 these rules will apply in the private sector.
This is another case which illustrates the complexity of assessing the correct tax status of contractors. Businesses which engage individuals through personal service companies need to ensure that they have systems in place to determine the IR35 status of its contractors, before the rules change in April 2021.