I'm a Celebrity and I've been caught by IR35: What lessons can we learn?
Lorraine Kelly. Christa Ackroyd. Eamonn Holmes. Robert Glenister. Kaye Adams. No, it's not the latest Strictly line-up. The above TV stars are just the visible few of the potentially large number of well-known names who are likely to have been caught-up in HMRC's ongoing IR35 crackdown.
As anyone with half on eye on the news will know, some have fared better than others. Lorraine Kelly, or rather Lorraine Kelly', avoided a substantial fine by claiming that her happy-go-lucky TV persona was just that a brand, and not a reflection of the real person. Kay Adams was judged to be sufficiently detached from the BBC to be outside IR35. Ackroyd was not. Glenister lost due to a combination of a lack of understanding and flimsy, poorly prepared legal arguments. Holmes' case is still going through the courts, with £2m of tax at stake.
The seemingly random targeting of certain well-known public figures, as well as the varied outcomes of the cases so far, certainly raises a few questions. Does HMRC actually understand its own IR35 rules, and how to apply them? Why does it keep taking disputed cases to court at significant expense - when it is likely to lose (see the recent Jensal Software Ltd and MDCM Ltd disputes for examples)? What does all of this mean for the private sector come April 2020?
All of the above are valid questions, but all deserve time and column inches that we can't fit into one blog. With Holmes' case ongoing and Glenister's a bit of an outlier (formulated, as it was, around his claim that IR35 should not apply to special NIC rules only for actors), it seems most appropriate to take a deeper dive into the outcomes of the judgements for and against Kelly, Adams, and Ackroyd and specifically to look at what the average contractor can learn from those rulings.
What can we take from the cases?
The cases serve to highlight the fine lines that can often be the difference between being seen as inside or outside IR35. All three women operated their own Personal Service Companies. Adams' and Ackroyd's primary end client was the BBC Adams with Loose Women and The Kaye Adams Show and Ackroyd as a presenter on Look North whilst Kelly's was ITV (with whom she worked on a number of shows including Lorraine, Daybreak, GMTV, TV-am, and ITV Breakfast).
Ultimately Kelly and Adams were judged to be outside IR35, whereas Ackroyd was found squarely inside. Kelly, as discussed, was seen as a brand in her own right (an issue that wasn't raised or discussed for Adams or Ackroyd). Of the three, it could be said that Adams was the only one who didn't do most or all of her work for the end client in question (in this case, the BBC).
Adams' contract with the BBC was for 1 year, whereas Ackroyd's was for 7. Kelly's ITV contract was 2.5 years. You can already see, given both the length of her contract and the fact that she did very little work for anyone but the BBC, why Ackroyd was found to be within IR35. When you are contracted to work for an end client for 7 years, there is a strong likelihood that the lines between contractor and employee can become irrevocably blurred.
But Kelly, too, has very rarely been seen outside the confines of ITV. So, what's the difference? It can be summarised in one word: control.
Adams wrote her own scripts, and the BBC did not have to consent to non-BBC agreements. Kelly also wrote her own scripts, was subject to little or no control by ITV and was, as previously mentioned, considered to be a theatrical artist. Neither woman had a clothing allowance paid by their end client either. They were, essentially, in business on their own accounts.
Ackroyd's situation was rather different, however. The BBC had first call on her time and availability, she attended BBC training sessions, could be told by the BBC who to interview, had to obtain the BBC's consent to undertake non-BBC arrangements, and had a clothing allowance paid by them. For all intents and purposes, there was not much difference between Ackroyd (ostensibly a contractor) and a regular employee of the BBC.
The blame game
One question remains: Where, exactly, does the blame lie? The BBC certainly did not cover itself in glory, and could have done more to help Ackroyd once the gravity of her situation became clear. In turn, Ackroyd (and her lawyers) could be seen to be rather naïve in not investigating the implications of her employment status further. And then there's HMRC. Already very much the bogeyman in the contracting community, their ongoing lack of clarity around the ins and outs of IR35 not to mention the lack of reliability of seemingly essential tools like CEST appears to have laid the groundwork for mass confusion on the part of contractors, recruiters, and end clients.
These cases are unlikely to be the last. It's also worth remembering that the vast majority of PSC's caught in labyrinthine IR35 wrangles have neither the visibility nor the wealth to battle HMRC as these celebrities have. But they certainly shine a light on a perplexing situation.
For any recruiter placing a contractor or providing advice to an end client when it comes to IR35, it is essential to remember three words: supervision, direction, and control. If your contractor is subject to any of these, they are likely to be inside IR35. For all parties involved, it pays to do your homework before signing over any paperwork. Our good friends at Larsen Howie have put together an excellent piece on contract clause examples for staying outside IR35.
At Kingsbridge we also offer two levels of Legal Expenses insurance, both of which include cover for IR35 disputes. If you want to find out more about that, or if you have questions about placing your contractors in their roles, don't hesitate to get in touch on 01242 808740.