Freelancers must keep confident and carry on, despite the Ackroyd case
As many predicted, Christa Ackroyd’s recent IR35 court case and her subsequent £419,151 tax bill, looks to have lifted the lid on the BBC’s working relationships with its presenters.
Mainstream press reports have now emerged alleging that the BBC “pressured” its presenters into setting up and working through their own Personal Service Companies (also known as Limited Companies), so the organisation could save millions in tax payments.
When investigated by HMRC, many BBC presenters could be found to be incorrectly working outside IR35 and like Ms Ackroyd, face huge tax bills.
It’s clear that HMRC is targeting BBC presenters to make a very public example of the freelancers and contractors abusing or -- as it has since been alleged, “encouraged” to abuse the rules.
Obviously, Ms Ackroyd’s case works in HMRC’s favour. And it’s an ‘easy win,’ so-to-speak. HMRC must know that a victory will build negative publicity around companies engaging workers through PSCs. On the face of it, it creates the illusion that working outside IR35 is increasingly difficult, and that if well-known media figures have been caught, then so will you.
Even calls for the BBC to take a portion of the blame for Ms Ackroyd’s resulting fine falls in HMRC’s favour. After all, it is the public sector engagers who now find themselves responsible and liable for missing tax following last year’s reform.
And it’s no coincidence this comes at a time when speculation surrounding changes to IR35 in the private sector is at an all-time high.
Increasingly, further IR35 reform looks to be a case of ‘when’ not ‘if.’ The government is yet to officially confirm this, but it would be a surprise for it not to be announced in the Autumn Budget this November, with possible implementation in April 2019.
There may even be a nod to the promised IR35 consultation in tomorrow’s Spring Statement 2018. There may be more than a nod. The current climate provides a good deal of momentum for the government to garner support from MPs, certain businesses and think-tanks to make the changes, even if they stick to the expected April 2019 commencement.
Indeed, such is the high-profile nature of Christa Ackroyd Media Ltd v Revenue & Customs (which has been heightened by another public sector IR35 case – which we fought -- waiting in the wings), that it’s impossible for anyone with half an interest in IR35 to miss this crackdown on disguised self-employment via PSCs. This is HMRC’s strategy exactly.
The case means that now, should they not have been already, private sector engagers and freelance contractors are acutely aware of HMRC’s high level of activity.
But in many respects, the BBC’s working relationships with its presenters does not represent a typical one. After all, in Ms Ackroyd’s case, the right of substitution was considered largely irrelevant given her role as a presenter. It’s also worth noting that HMRC’s IR35 tool (CEST), doesn’t account for these stark differences in trade and job role when determining IR35 status.
In many cases, the relationships between the BBC and its presenters are quite different to the vast majority of freelance contractors and their clients. And this is reflected in further details of Ms Ackroyd’s case.
In the BBC’s contract with Ms Ackroyd, it was revealed the organisation held “editorial responsibility.” This, and the fact the former Look North presenter was required to ask the organisation for permission to take on any other work, signalled she had no real ‘Control’ in the working arrangement.
It was also found the BBC had “first call” on Ms Ackroyd’s services and could engage her on “any particular day subject to reasonable notice.” In addition to this, the case report stated; “We do not consider that Ms Ackroyd could fairly be described as being in business on her account.”
Unsurprisingly, these factors – and it has to be said, many others – contributed to the tribunal judge deciding Ms Ackroyd’s working arrangement was in fact caught by IR35.
And so, this situation should not strike fear into genuinely self-employed contractors and freelancers working outside IR35. Given Ms Ackroyd’s colossal fine though, it should be a reminder of the risks of IR35, and the need to be confident about whether your contract should fall inside or outside. Nothing more; nothing less.
Regardless of how a contractor or freelancer enters this manner of working in the private sector, IR35 is still their responsibility.
Finally, the press reports of the BBC ‘encouraging’ presenters to work as freelance companies to save itself from paying National Insurance Contributions also goes to show how important it is that contractors and freelancers aren’t pushed into trading methods that clearly aren’t fit for purpose. The BBC denies this -- of course, but freelance contractors know it’s a motivating factor for some end-users and so cannot be ruled out. It’s a time for PSCs to be confident about the realities they’re up against, not cowed.