Mad Tax: Fury Royd
Forsters tax discuss the latest IR35 case law and HMRC guidance
There are interesting insights into what “control” means in the context of IR35 in the recent Upper Tribunal decision relating to Christa Ackroyd Media Limited.
Ms Ackroyd had appealed against the First- tier Tribunal’s (FTT) decision that IR35 applied to the services that she provided through her personal service company (PSC) to the BBC, when she presented the programme Look North. The Upper Tribunal found that the facts relied on by the FTT allowed the conclusion that the right of ultimate control rested with the BBC.
The First Tier Tribunal had not erred in law when it concluded that, under the hypothetical contract treated as being in place between Ms Ackroyd and the BBC, the BBC had sufficient control over the services she provided to satisfy the control requirement needed for an employment relationship.
Ms Ackroyd’s original evidence was that she would never have entered into a contract with the BBC if that meant that the BBC would control the way she worked but the Upper Tribunal held that it was not the subjective intentions of the parties that mattered. What mattered was not whether the BBC would in practice control her but whether they could do so.
Despite this latest win for the tax man, the taxpayer can take some comfort from HMRC's recently issued briefing "Reform of off-payroll working rules" published 22 October 2019.
From April 2020 large and medium- sized businesses in the private sector will need to decide whether those providing services through PSCs to them should be treated as employees. These rules already apply to public sector organizations.
Individuals using PSCs had been concerned that the compliance burden shift from the PSC to the end client would mean that these larger, risk adverse, companies would be likely to apply the IR35 rules to any payments they made to PSCs. HMRC could then start investigating large numbers of PSCs which had previously decided that they were outside IR35. The concern was that HMRC would then pursue those PSCs and their owners for years of back taxes, arguing that they had incorrectly decided they were outside the IR35 regime.
HMRC have however now confirmed ( on a non- statutory basis) that they will "only use information resulting from these changes to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour." This should provide some comfort to PSCs and their owners that they will not automatically be facing HMRC investigations into whether historical tax is due.
However, if PSCs and their owners are concerned that, in light of recent case law, their position is not as certain as they once thought it might be, then now is the best time to seek advice and have the arrangements reviewed, so that any steps forward can be taken with the benefit of full information.