Does Adrian Chiles’ long-fought victory against HMRC demonstrate the increasing importance of the IBOYOA test in determining the correct application of IR35?
Not long after HMRC’s resounding win in the Little Piece of Paradise case, a First-Tier Tribunal has ruled on another broadcasting industry case. This time, it was the turn of Adrian Chiles and his business, Basic Broadcasting Ltd (BBL) to take on HMRC, which had demanded £1.7m in IR35 payments.
Originally employed by the BBC in 1992 as a journalist, Chiles was asked to cease his employment with the broadcaster around 1996 and instead provide his services through his own limited company – a common request made of presenters at that time.
After its incorporation in March 1996, BBL entered into a series of contracts with the BBC for Chiles’ services, including presenting jobs on The One Show, Match of the Day 2 and The Apprentice: You’re Fired. Between 2010 and 2015, Chiles worked with ITV, presenting the breakfast show Daybreak as well as covering ITV’s live football coverage and other factual entertainment programmes. He is currently a presenter on BBC Radio 5 Live.
The appeal concerned five contracts – two with ITV and three with the BBC – relating to tax years 2012/13 through to 2016/17. After a five-year investigation, HMRC sought £1.7m in income tax and National Insurance contributions.
The case was originally heard by Judge Mosedale in November 2019, but she was unable to write the decision for health reasons, leading to a further hearing led by Judge Cannan two years later. For both hearings, the parties were represented by legal counsel, which has become normal practice for HMRC in such cases.
By the time the second hearing sat, seven years had elapsed since HMRC’s initial contact with BBL, prompting Judge Cannan to comment that the proceedings had “cast a shadow over [Chiles’] life for much longer than anyone would have wished.”
In reaching his decision, Judge Cannan employed the ‘tripartite test’ often used to determine employment status, as set out by McKenna J in Ready Mixed Concrete (South East) v Minister of Pensions and National Insurance  2QB 497 at p515:
“A contract of service exists if these three conditions are fulfilled.
(i) 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.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.
(iii) The other provisions of the contract are consistent with its being a contract of services.”
Judge Cannan’s findings were as follows:
- Mutuality of obligation was present in both the BBC and ITV contracts.
- Chiles provided his personal service and had never exercised the right of substitution, nor was it likely he ever would. Therefore, substitution and personal service did not form part of the Tribunal’s considerations when constructing the hypothetical contract between Chiles and the BBC and ITV.
- A sufficient framework of control existed in all the BBC and ITV contracts, suggesting that Chiles was – in accordance with the hypothetical contracts created between him and the two broadcasters – an employee of both.
Despite falling short on the three main status tests, all was not yet lost for Chiles and his company – the Tribunal was still to consider the ‘in business of your own account’ (IBOYOA) test. It found the following:
- Between 1996 and 2019, Chiles had approximately 100 engagements with third parties. During the tax years under enquiry specifically, he entered into 40 engagements with 25 different clients.
- The scope of the engagements was described as “wide”, covering not just presenting, but writing newspaper articles and columns, appearing in commercials, presenting at awards ceremonies and professional speaking.
- Chiles had engaged a management company to further his career, for which they were paid 15% of his total income generated from the entertainment industry.
- A personal assistant was also engaged between 2012 and 2017 and paid an average of £15,900 per year.
- Chiles had participated in failed commercial projects and had turned down other work, including television appearances. For one TV show he helped to create, he was entitled to a share of the production’s profits.
Based on these clear business factors, Judge Cannan determined that IR35 did not apply to any of the contracts under enquiry. The judgement is comparable to another IR35 broadcasting case heard by the Upper Tribunal, Atholl House, in which IBOYOA factors were significant in the tribunal’s ruling that IR35 did not apply.
Although a logical conclusion in terms of the nature and extent of the IBOYOA factors raised, this decision appears to undermine decades of employment status judgements, where despite all factors being considered, the three key tests – personal service, control and mutuality of obligations – have almost universally determined the outcome.
Although it has always been a consideration in establishing the correct application of IR35, recent judgements suggest the IBOYOA test is becoming increasingly important.
However, like Atholl House, this judgement must be considered in light of specific facts. Most professional freelancers moving from one short-term assignment to another are unlikely to be able to demonstrate such a level of IBOYOA factors, so the case is not necessarily applicable to the general contracting world.
It’s also possible that with £1.7m at stake, HMRC may decide to appeal this ruling, as it did with other broadcasting cases such as Atholl House. However, given the personal strain the seven-year battle has put on Chiles, it may decide that enough is enough.