IR35 and contracts of employment

In an article for Taxation magazine, BKL consultant David Whiscombe examines how apparently similar cases on the application of the IR35 rules can lead to very different First-tier Tribunal decisions, as in the cases of Christa Ackroyd and Lorraine Kelly.

Key points

  • Apparently similar cases on the application of the IR35 rules were determined differently.
  • The relevant factors set out in the Ready Mixed Concrete case.
  • Who had editorial control of a programme: and determined its content.
  • A tribunal will be influenced by the impression it forms of the witnesses providing evidence.
  • In the Albatel case, Ms Kelly had substantial control and her personality was important.
  • Were there sufficient differences between the cases to justify different conclusions?

Tribunal decisions in contested tax matters are often fact-dependent. Small differences may be crucial and apparently similar cases can have very different outcomes. This is perhaps nowhere more true than in questions of employment. In February 2018, the First-tier Tribunal held in Christa Ackroyd Media Ltd (TC6334) that arrangements involving a presenter anchoring a BBC programme were within the scope of ITEPA 2003, Pt 2 ch 8 (IR35). A little over a year later, in Albatel Ltd (TC7045), the tribunal held that ostensibly similar arrangements involving a presenter anchoring an ITV programme were not. In this article we shall try to understand why the decisions went different ways. It must be said that our efforts will not meet with unqualified success.

The Christa Ackroyd case

Christa Ackroyd was an experienced TV journalist who, from 1990, had co-presented Yorkshire Television’s news and current affairs programme Calendar. In 2001, the BBC recruited Ms Ackroyd, in essence to revamp its competing programme Look North which at that time lagged behind Calendar in the ratings. The contract was between the BBC and Ms Ackroyd’s eponymous service company. The question before the tribunal was whether, if the engagement had been made directly between the BBC and Ms Ackroyd, it would have been an employment contract. As with all IR35 cases, therefore, the tribunal’s task was to hypothesise what the terms of that contract would have been and to apply to that hypothetical contract the same criteria as would be applied to an actual employment contract. The criteria are by now fairly well-known: the starting point is as stated by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497:

‘I must now consider what is meant by a contract of service. A contract of service exists if the following 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 service.’

Question of control

The principal battleground between the parties was on the question of control. It is well-established that we are here concerned not with direct day-to-day oversight of exactly how the worker does the work, but with the ultimate authority over the performance of the work. Plainly, the BBC could have no control over the words that any presenter used in a live programme such as Look North. What was relevant was who had editorial control of the programme: who determined its content and who had the last word in any dispute in these matters.

Ms Ackroyd gave evidence to the effect that such control lay with her. She had, she said, ‘a “defining role” in which she could use her considerable experience to change, mould and shape Look North…’ and ‘it was agreed that she could make whatever changes she wanted to the programme’. She asserted that the BBC had given her ‘a guarantee of “independence” and “control”’ and that she had day-to-day editorial control.

Unfortunately for Ms Ackroyd, the tribunal did not accept her view of the matter. In fact, although there was and is no suggestion of dishonesty or attempts to mislead, she does not seem to have impressed the tribunal as a witness:

‘We do not consider that she was deliberately trying to evade difficult questions, but we did form the impression that she was keen to identify opportunities to present her case in the best light. She was clearly aware that cases such as this turn on value judgments as to the significance of various features, some pointing towards employment and some pointing towards self-employment. In her evidence she was keen to highlight those features which she considered would help her case, occasionally at the expense of directly answering the questions being asked.’

Tribunal judges are human and, inevitably, any fact-finding tribunal is bound to be influenced by the impression it forms of the witnesses who give evidence before it: a lesson that all litigants must take to heart.

BBC guidelines

In looking at control, the tribunal was heavily influenced by the existence of the BBC’s editorial guidelines. It accepted that these were not incorporated as terms of the hypothetical contract, but noted that they did ‘form part of the context in which we must construe the hypothetical contract’. Crucially, ‘it was necessary for the BBC to at least have the power to direct Ms Ackroyd’s work, otherwise Look Northas a programme ran the risk of not complying with the editorial guidelines’. However, the tribunal had earlier quoted from the guidelines to the effect that: ‘Our staff, those freelancers working with us, and the independent producers we commission – all need to be familiar with these guidelines and to apply their underlying principles. This is more than just a moral responsibility; it is also a contractual obligation for everyone who makes programmes for the BBC…’ It is thus difficult to see how the tribunal concluded either that the guidelines were not incorporated as terms of the hypothetical contract or how the obligation to comply with them (which applied to everyone including ‘independent producers’) could be regarded as any evidence of control by the BBC.

Status is a multi-factorial decision and there were other factors that weighed in the balance against Ms Ackroyd. The length of the contract, at seven years, was not of itself a determining factor but it ‘meant that Ms Ackroyd’s work at the BBC was pursuant to a highly stable, regular and continuous arrangement. It involved a high degree of continuity rather than a succession of short-term engagements. That is a pointer towards an employment contract.’ Probably more damaging was the fact that under the contract with her company, the BBC had first call on Ms Ackroyd’s services ‘as it may require’. The tribunal conceded that the relevant clause was not well worded, but concluded that ‘the BBC could require Ms Ackroyd not only to work on a particular day, but also it could direct what work she did. They could require her if necessary to report on a particular story without also presenting the Look North programme. That is the effect of the words “as it may require”. There is no evidence that happened in practice, but we find that the BBC was contractually entitled to do so.’

On balance, therefore, the tribunal held that the hypothetical contract contemplated by IR35 would have been one of employment.

Lorraine Kelly and Albatel Ltd

In the light of the decision in Ackroyd (though not, of course, technically a precedent) Albatel Ltd and its shareholder Lorraine Kelly could have been forgiven for entering the court of the First-tier Tribunal with some trepidation. In fact, the tribunal does not seem to have found this a very difficult decision:

‘In our view the level of control falls far substantially below the sufficient degree required to demonstrate a contract of service and we are satisfied that the factors strongly indicate that the contract was one for services.’

Ms Kelly was the presenter of two ITV programmes, Lorraine and (for part of the period) Daybreak. She had been persuaded to present Daybreak for much the same (lack of) ratings reasons that Ms Ackroyd had been hired for Look North. No such rescue seems to have been necessary for Lorraine – but the tribunal decision does not differentiate between Ms Kelly’s role in the two programmes.

As with Ackroyd, the main argument was about control – although there was a subsidiary point, not dealt with in this article, as to whether Ms Kelly was an ‘entertainer’ such that even if IR35 applied her agency fees were tax-deductible. Thus, the same principles evinced above applied.

Ms Kelly clearly made a much better impression on the tribunal than did Ms Ackroyd:

‘We did not accept the criticisms of Ms Kelly and (to a lesser degree) Ms Walton’s evidence as seeking to avoid giving answers detrimental to the appellant’s case. Ms Kelly is clearly an intelligent lady who understood the nature of the case and we found it understandable that she sought to understand the questions being asked of her. However, we did not find that this detracted from the reliability of the evidence she gave.

Calling the shots

The Ms Walton referred to was the editor and executive producer of Lorraine who gave evidence broadly supportive of Ms Kelly’s case. Contrast that with Ms Ackroyd: she had seriously fallen out with the BBC and to some extent blamed the corporation for her predicament, first for encouraging her to operate through a service company and then for (allegedly) making her ‘a scapegoat following an internal inquiry into the BBC’s use of “freelancers”’. Whatever the rights or wrongs, one striking difference between Ackroyd and Albatel is the extent to which the engager did (or did not) line up to support the presenter.

The evidence of Ms Kelly and Ms Walton as to who ‘called the shots’ on the running of the programmes pointed strongly against employment. For example, Ms Kelly could make changes to the script or running order and approve any late additions; she could allow an interview to overrun and drop an item that was to appear later on the show; she would ‘discuss and decide on guests, content and running order’; she gave a number of examples of turning down an interview as being inconvenient; and she chose her co-presenter for Daybreak (though he was paid by ITV). Ms Walton averred that ‘the DNA of the show and Ms Kelly are intertwined – she and her personality are the brand’ and Ms Kelly ‘operates in an Oprah type way’.

All of this was accepted by the tribunal as inevitably leading to the conclusion that ITV lacked the degree or type of control necessary to render the hypothetical contract one of employment although some of the phraseology used in the judgment is a little cryptic. Some might struggle to understand exactly what is meant by saying that ‘it was Ms Kelly’s “brand” that was specifically engaged’; that ‘we accepted the parallel drawn with “Oprah”’; and, in particular, ‘contrary to being part of a jigsaw, Ms Kelly was the jigsaw’.

As regards Lorraine the tribunal ‘can put it no better than the witnesses when they told us “it was her name on the door”’.

Weighing the facts

It must be said that other evidence and contractual terms very similar to those in Ackroyd seem to have carried rather less weight than might have been expected. The contract required, for example, that Ms Kelly should give ‘full and willing co-operation with reasonable requests made to [her] from time to time by the executive producer’ and Ms Kelly conceded that ‘ITV could alter or edit anything in the programme’. HMRC’s meeting notes confirmed that ‘the decision as to who to interview is a shared thing, the broadcaster has the right of veto’ and, most tellingly, that ‘Ms Walton as editor is responsible for the programme flow and has ultimate broadcasting compliance responsibility. She has the right to drop, change or add a story.’ All of these are remarkably similar to factors that had led to HMRC’s victory in Ackroyd. Almost as remarkable is the uncontested assertion that Ms Kelly is ‘not bound by ITV’s code of conduct which is for employees’, an obvious contrast to the BBC’s insistence that its editorial guidelines are of universal application to BBC employees and freelancers alike.

In the same way that some factors, inconclusive on their own, weighed against Ms Ackroyd, there were subsidiary factors that favoured Ms Kelly. The facts that she was free to carry out other work and activities without any real restriction, and that during the relevant time anything from one-third to two-thirds of the company’s income came from sources other than ITV were not unhelpful to her case (contrast Ms Ackroyd, who depended on the BBC for well over 90% of her income).


There were, of course, differences in the facts of the two cases. However, a niggling doubt remains about whether they were really quite different enough to warrant these contrasting conclusions.

Ms Kelly is a star entertainer performing on national TV; Ms Ackroyd a lower-profile regional news journalist. Did that make any difference? Should it? Would the results have been different if Ms Ackroyd had come over a little more favourably as a witness; or if she had been able to count on the support of the engager as Ms Kelly did?

Ms Kelly will be delighted (and, we suspect, not a little relieved) with her result; Ms Ackroyd may be pondering what might have been.

This article was first published in Taxation magazine Issue 4692 and is also available on the Taxation website.

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Related article: Spot the difference: Ackroyd and Kelly – TV presenters and tax



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