TV Presenter Adrian Chiles Successful in IR35 Appeal

In a recent appeal to the First Tier Tribunal (“FTT”) by well-known TV presenter Adrian Chiles, it was ruled that the Intermediaries Legislation (known as IR35) did not apply. This was a significant success for the taxpayer – indeed, just over £1.7m of PAYE and NICs were at stake. This blog will consider the deciding factors in this case and the relevance of these for future cases. The decision of the case can be read here. What is the Intermediaries Legislation (IR35)? In summary, the Intermediaries Legislation (found in ITEPA 2003 and known as “IR35”) is applicable where an individual provides services through a Personal Service Company (“PSC”) and thereby avoids PAYE and National Insurance. It is necessary to consider whether the work performed by the individual was in effect employment (i.e. if the intermediary company had not existed would the individual have been treated as an employee?). This involves an analysis of the relationship between the individual and the client.  There have been a number of recent high-profile cases in this area – please see our blog page for further details. What happened in this case? In this case, Adrian Chiles provided services to the BBC and ITV through his PSC (Basic Broadcasting Limited “BBL”). HMRC raised assessments in relation to BBL regarding PAYE and National Insurance (amounting to just over £1.7m) for tax years in the period 2012/13 to 2016/17. BBL contended that he carried out the work through a contract for services (i.e. self-employment) for the purposes of the Intermediaries Legislation (IR35) and there was no further tax liability. HMRC claimed that the contracts between Chiles and the BBC and ITV fell within the Intermediaries Legislation (IR35) on the basis that if BBL had not existed, Adrian Chiles would have been treated as an employee. If this was the case, BBL was responsible for operating PAYE and NICs on the ‘deemed employment’ (note: the rules have now changed if the end client is not ‘small.’). If not, PAYE and NICs would not need to be applied. What were the deciding factors? This case considered the following points (taken from Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497) to determine whether the relationship between Chiles and the BBC and ITV would have amounted to employment if BBL had not existed (i.e. there was a contract of service, as opposed to a contract for services): “A contract of service exists if these three conditions are fulfilled:

1. 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 [known as Mutuality of Obligation];
2. He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in sufficient degree to make that other master [known as sufficient Framework of Control];
3. The other provisions of the contract are consistent with its being a contract of service.”

The present case states “If the first two conditions are satisfied, the contract will be a contract of employment unless there are other provisions of the contract or other factors which are inconsistent with that conclusion and of sufficient importance that the Tribunal can conclude that the contract is not one of service” (Basic Broadcasting Limited v The Commissioners for Her Majesty’s Revenue and Customs [2022]). What was the conclusion here? In relation to the above conditions, the FTT found that condition 1 was met because Chiles could not substitute another person to carry out the work for him and he was required to carry out the work if he was asked to do so and was entitled to be paid for the work, even if he was not used (ITV Fee Guarantee). The FTT also found that point 2 was met because the BBC and ITV had the editorial control, could require Chiles to comply with ‘reasonable requests’ and Chiles was subject to Ofcom rules and the BBC Standards and Editorial Guidelines. This therefore concluded that there was a sufficient framework of control. In relation to point 3, the FTT needed to consider whether point 3 would displace point 1 and point 2.  The FTT concluded that Chiles was ‘in business on his own account.’ This meant that under the above tests his contracts were not ‘contracts of service.’ The reasons given for this were as follows (Basic Broadcasting Limited v The Commissioners for Her Majesty’s Revenue and Customs [2022]):

• “Since at least 2001, Mr Chiles had provided his services as a broadcaster and journalist to a significant number of clients” [in addition to the BBC and ITV]
• “In addition to this work, Mr Chiles undertook work on other commercial projects which did not bear fruit and turned down other work including television appearances. [The FTT was][…] satisfied that in the period from 2007 onwards when Avalon [his agent] was appointed Mr Chiles was building a reputation and a career working through BBL”
• Chiles had an agent to act as his management company with regard to all aspects of his work in the entertainment industry [Avalon] and Avalon’s fee was “15% of his income from the entertainment industry”.
• Chiles had a “personal assistant to manage his diary and to liaise with Avalon, the BB and his other clients.”
• Chiles and Avalon pitched a programme to the BBC in 2009, which was later adopted by ITV – Child “had helped to create the format and was a co-producer entitled to a share of the production profits. He was ultimately engaged by Avalon to present the programme.”
• In the relevant period, “he entered into 40 separate agreements with some 25 different third parties”
• His other income earned in the relevant period from “2012 to 2017 excluding his income as a presenter for ITV and the BBC under the hypothetical contacts was some £350,000.”

The FTT therefore concluded that the contracts between Adrian Chiles and the BBC and ITV were contracts for services and not contracts of services (employment) – consequently, the IR35 rules were not applicable, and no PAYE or National Insurance was payable. Please note that the FTT stated that there was no suggestion that Adrian Chiles set out to avoid tax by supplying his services through his PSC. Why is this case important? The above factors may be relevant for future cases in this area, particularly if conditions 1 and 2 above are met (to suggest employment) but there are other provisions of the contract which may be inconsistent with a contract of services. If you are unsure of whether the IR35 rules may apply to your circumstances, please get in touch with a member of our team and we will be happy to talk this through with you.