Newsletters Tax 12th Mar 2018

I-AHHHH 35: There’s Trouble Ahead

Christa Ackroyd Media Limited -v- The Commissioners for HM Revenue and Customs [2018] UKFTT 69 (TC)

Christa Ackroyd (“Ms Ackroyd”), a well-known journalist, had her employment relationship with the BBC put under the microscope by the First-tier Tribunal (Tax Chamber) (“the Tribunal”). She presented BBC1’s program “Look North” from 2001 until 2013.

Christa Ackroyd Media Limited (“the Appellant”) was a Personal Service Company and it was that company which received a determination from the Commissioners for HM Revenue and Customs (“the Respondents”) in the sum of £419,151 for the non-payment of income tax and national insurance contributions. Ms Ackroyd was effectively employed by the Appellant (for which she was also a director of) and the Appellant contracted with the BBC offering Ms Ackroyd’s services as a presenter.

The issue

The issue for determination was whether Ms Ackroyd’s status for the purposes of the relevant legislation was that of an employee. It was said that this should be done by reference to the hypothetical contract between the BBC and Ms Ackroyd. Put simply, the Tribunal had to determine if the services provided by Ms Ackroyd were provided under a contract directly between the BBC and Ms Ackroyd, would Ms Ackroyd be regarded for income tax purposes as an employee of the BBC?

The outcome?

The Tribunal examined Ms Ackroyd’s relationship with the BBC in great detail. At the outset the Tribunal commented on the way in which she gave her evidence which plainly did not assist her case. The problem with the way in which she gave evidence was highlighted by the Tribunal when it found the following:

“Ms Ackroyd’s evidence did, we think, reflect the fact that she is more used to interviewing than being interviewed. It seemed to us that at various points in her cross-examination she was more concerned with understanding where the line of questioning was going than in giving direct answers to the questions being asked. We had to remind her to answer the questions being asked on several occasions. We do not consider that she was deliberately trying to evade difficult questions, but we did form the impression that she was keen to identify opportunities to present her case in the best light. She was clearly aware that cases such as this turn on value judgments as to the significance of various features, some pointing towards employment and some pointing towards self-employment. In her evidence she was keen to highlight those features which she considered would help her case, occasionally at the expense of directly answering the questions being asked.”

The Tribunal observed that there was little disagreement about the principles to be applied by it and referred to the conditions required for a contract of services in the decision of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 515 as follows:

“(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.”

It was said that this could be broken into the following conditions:

  1. Mutuality of obligations;
  2. Control to a sufficient degree; and
  3. If conditions 1 and 2 were satisfied there was a contract of service unless there were provisions of the contract, of sufficient importance, which would be inconsistent with a finding that the contract was one of service.

It was said by the Tribunal that in respect of the first condition this would be satisfied where there was a contractual requirement on the employer to provide payment, in the nature of a retainer for a minimum number of hours per year, irrespective of whether those hours were actually worked (paragraph 133).

In respect of the second condition the Tribunal reaffirmed the position that control was an important factor, but that it was not itself decisive. It found the key question to be “whether in practice the worker has actual day to day control over his own work, but whether there is, to a sufficient degree, a contractual right of control.” This question was to be judged by the practical realities of any particular industry considering the performance of work (paragraph 134).

The Tribunal then considered the “hypothetical contract” where it was found that the stated intentions of the parties could not prevail over the true legal effect of the actual agreements. In the instant case this was to be considered by way of the actual contract between the Appellant and the BBC. Whilst it was argued that Ms Ackroyd would have control over the stories, how they were covered and whether there should be an “outside broadcast”, this was rejected by the Tribunal.

The Tribunal concluded that on the evidence, Ms Ackroyd, albeit the services that she provided to the BBC were through a personal services company, should be considered to be an employee under a hypothetical contract.

In responding to each condition the Tribunal found that:

  1. Ms Ackroyd was required to work for the BBC for at least 225 days in any one year, and the BBC was required to pay the fees set out in the contract;
  2. Ms Ackroyd was controlled by the BBC in that:

a. It had first call on her services;
b. Could tell her which services to perform (i.e. presenting, reporting or reasonable ancillary services);
c. The BBC was not obliged to act on Ms Ackroyd’s recommendations;
d. The BBC had the last word in that if Ms Ackroyd was to be in breach of the BBC Editorial Guidelines, the BBC would prevent her from undertaking the act that would put her in breach;
e. Ms Ackroyd did not have the last word on changes that she wanted to make; and

3. There were precious few other factors which militated against a contract of service being found particularly as Ms Ackroyd:

a. Was unable to provide a substitute;
b. Had a BBC email address;
c. Attended training seminars; and
d. Had a very lengthy contract which would indicate a high degree of continuity.

Whilst the above analysis does not deal with every factor the Tribunal took into account to arrive at its conclusion that Ms Ackroyd was an “employee”, the Tribunal found the most relevant to its decision as follows:

“179. We must consider all the factors above and the relative weight attaching to those factors. 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 7 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. If the services provided by Ms Ackroyd were provided under a contract directly between the BBC and Ms Ackroyd, then Ms Ackroyd would be regarded for income tax purposes as an employee of the BBC.

  1. We acknowledge that this is a value judgement. It is in the nature of a value judgement that different people may come to different conclusions. We do not criticise Ms Ackroyd for not realising that the IR35 legislation was engaged. She took professional advice in relation to the contractual arrangements with the BBC and she was encouraged by the BBC to contract through a personal service company.


Undoubtedly this will cause concern for a large cross section of people who work through personal service companies. It is notable that there are already rumours of various BBC personalities in a “Whatsapp Group” calling for the BBC to pay the portion of the tax bills that they end up being required to pay by the Respondents on the basis that the BBC is alleged to have actively encouraged the use of such personal service companies.

The importance of this decision has been understated from a variety of commentators on the basis that it is a decision of the First-tier Tribunal (i.e. not binding on subsequent Tribunals), it is only a single success by the Revenue in a long line of failures surrounding IR35 and the fact that it is fact specific. However, in the authors view, such an approach would be akin to burying one’s head in the sand. This decision does have significant implications particularly those who have contracted through Personal Service Companies at an “employer’s” insistence. This decision draws together, very clearly, the relevant authority in the area. It would appear that on the current analysis as applied to this case, there is very likely to be a significant number of “contractors” caught by it.

Of particular concern will be those who have worked through personal service companies for some time on the advice of the contracting company, or independent advisors. It will be important to consider, by way of example only:

  1. Length of time working at a particular location;
  2. Control over the type of work that is being undertaken each day;
  3. The contracting parties control over the person to direct them to do various tasks;
  4. Whether travel would be reimbursed;
  5. Whether there is a line manager who supervises the taxpayers work;
  6. The number and frequency of hours worked or required to be worked;
  7. Whether a taxpayer is providing his own equipment to perform a task or whether that equipment is provided to them; and
  8. Whether a taxpayer has the ability to work for or at unrelated entities or whether permission would need to be first sought.

However, it should be remembered that the Tribunal in the present case indicated that it would not be appropriate to adopt a mechanistic or “check list” approach. It was stated that “different factors will have difference (sic) significance and weight in each case”.

Those who are concerned that they will be affected should seek urgent advice about their tax position. It will be essential to identify as early as possible what evidence should be adduced including potential witnesses and documentary evidence to support an assertion that a taxpayer is not “employed”.

Joshua Carey 

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