Kaye Adams’ £124,000 IR35 case to be reheard

28th April 2022
Written by Qdos Contractor

Court of Appeal finds Upper Tribunal erred in law

Presenter Kaye Adams has even longer to wait for a resolution to her IR35 case, after the Court of Appeal partially accepted HMRC’s appeal and instructed for it to be reheard at a lower tribunal.

The case related to work carried out by Adams via her limited company, Atholl House Productions Ltd, for the BBC between 2013 and 2017, when hosting the ‘Kaye Adams Programme’. 

The tax liability, which HMRC believes is owed due to Adams working as disguised employee, amounts to £81,150.60 in Income Tax and £43,290.98 in National Insurance Contributions.

It was as recent as last year that an Upper Tribunal (UT) deemed Adams’ contracts as outside IR35, despite the BBC holding a high level of editorial control over the engagement and the worker being unable to provide a substitute unless in ‘exceptional circumstances’– two important factors in IR35 status determinations. 

The UT judges held the view that Adams having multiple clients showed she was in business on her own account. However, HMRC appealed this decision, escalating the case to the Court of Appeal which, having considered the tax office’s argument, has referred the case back to the the UT once more. 

So let’s look at why HMRC appealed…

Ready Mixed Concrete (RMC) was misinterpreted

As documented in the case notes, HMRC claimed the UT “erred in law in its interpretation and application of the third stage of the RMC test”. 

Despite having been argued as long ago as 1968, RMC is one of the most important pieces of employment status case law – and the first to outline specific criteria (including personal service, control and Mutuality of Obligation (MoO)) for determining employment status. 

Other factors, such as being in business on your own account, sit in what’s known as RMC’s ‘third stage’, which is what HMRC focused on in this appeal. 

The tax office argued:

  • The UT “erroneously adopted a test” when deciding if Adams was in business on her own account instead of the correct analysis required as part of the ‘third stage’ of RMC.

  • The UT worked on the basis that it was an “evenly balanced starting point” when considering this ‘third stage’ of RMC. In other words, it failed it consider how MoO and control impacted the ‘third stage’.

  • The UT failed to apply the ‘third stage’ to relevant aspects of the hypothetical contracts held by Adams. By the hypothetical contract, we mean the contract built in IR35 court cases to demonstrate the true relationship between a contractor and their client.

Whilst Judge David Richards rejected HMRC’s submissions, which would have fundamentally altered the way status should be determined, they also found that the Upper Tribunal’s decision was undermined and would need to be reconsidered. 

Full hypothetical contract must be assessed 

HMRC also claimed that the UT didn’t take into account relevant considerations, instead considering irrelevant ones, in relation to the hypothetical contracts and the issue of whether Adams was in business on her own account.

Judge Richards’ agreed, stating that while the hypothetical contracts indicate that MoO was present and that the BBC controlled the working relationship, there is a need to assess if – under the hypothetical contract – the engagement would have reflected employment or self-employment. He said: “This is an assessment which has yet to be made in this case on a correct basis.”


A summary 

While this was neither a win for Adams or HMRC, the fact that the case will be reheard in due course gives the tax office yet another opportunity to overturn Adams’ status  heading into a new round of hearings. 

However, it must be made clear that Adams’ contractual terms and working practices differ greatly from the majority of typical contractors operating outside IR35 – who often hold the right of substitution, are not controlled by their client and do not have a mutual obligation to work for them.

With this in mind, other than signalling HMRC’s appetite for IR35 investigations, this case should not dissuade contractors from working this way, nor businesses from engaging them safely outside IR35. 

Qdos Contractor
Written by
Qdos Contractor
Award-winning providers of insurance for the self-employed, Qdos are the leading authority on IR35, offering industry-leading employment status services to ensure the flexible working industry thrive. Qdos are the Best Contractor Insurance Provider 2022 and won the Queen’s Award for Enterprise in Innovation 2022 and 2017. 

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