HMRC lose the long running IR35 case of Atholl House for the 3rd time

The First Tier Tribunal has yet again found in favour of Ms Kaye Adams’ personal service company – Atholl House Productions Limited (AHPL) – in this long-standing IR35 case with HMRC. It would now be hoped that this enquiry, which has been ongoing for nearly 9 years, can finally be laid to rest. 

Since AHPL initially appealed against the tax determinations and Class 1 National Insurance Contributions (NIC) decisions raised by HMRC on the basis that it considered that the engagement between AHPL and the BBC was one of deemed employment, this case has gone before five separate tribunals:

• March 2019 – Initial First Tier Tribunal: Case found in favour of AHPL.
• November 2020 – Upper Tier Tribunal: Whilst the original decision was set aside as it contained errors of law, the decision was remade and still found in favour of AHPL.
• February 2022 – Court of Appeal: Whilst it was agreed there had been some errors in law and the previous decision was set aside, the case was referred back to the Upper Tier Tribunal for the decision to be remade.
• October 2022 – Upper Tier Tribunal: Concluded that the appropriate forum for the ongoing dispute was the First Tier Tribunal and remitted proceedings there.
• October 2023 – First Tier Tribunal: Case found in favour of AHPL.

The latest tribunal case focused on the third limb of the statutory IR35 test, namely whether the circumstances in which Ms Adams carried out her services would have resulted in her being considered an employee for tax and NIC purposes if those services were provided under a contract directly between Ms Adams and the BBC.

This third limb test follows a three-stage process:

• Stage 1: Find the terms of the actual contract which existed at the time and the relevant circumstances under which the worker carried out the services;
• Stage 2: Ascertain the terms of the hypothetical contract; and

• Stage 3: Consider whether that hypothetical contract would have been a contract of employment. This entails applying the three tests as set out in the Ready Mixed Concrete

The Tribunal acknowledged that it was a finely balanced case and, on standing back and considering the various factors as a whole, found that the pointers towards self-employment outweighed those pointers towards employment. Those self-employment indicators included –

• The absence of control over other engagements Ms Adams undertook.
• The BBC did not treat her as an employee in any way.
• Her ability to exploit her talents in the wider market and her economic independence from the BBC.
• There was an unequivocal statement in each written agreement that the parties did not create a relationship that was one of employment.

The Tribunal concluded that the IR35 legislation did not apply and upheld AHPL’s appeal.

Only time will tell whether the outcome of this latest appeal will have a positive effect on current IR35 cases being pursued by HMRC and whether it will result in HMRC changing its approach when looking at IR35 cases.

There is, of course, the potential for HMRC to look to appeal this latest decision so this might not be the end of the matter. However, if HMRC decide to keep going it, it will surely raise questions over whether this would be a good use of HMRC’s resources and public funds.