Efficiency

Former BBC presenter to pay HMRC over ?400,000 after losing IR35 case

Christa Ackroyd, a former BBC presenter, has been ordered to pay more than ?400,000 in unpaid tax after the High Court ruled that she was caught by IR35 tax legislation.

HMRC has won an IR35 case against former presenter of BBC Look North, Christa Ackroyd, who worked for the BBC through Christa Ackroyd Media (CAM).

HMRC contested CAM Ltd?s engagement with the BBC in the first IR35 case since 2011, and it has resulted in a bill just shy of ?420,000 for CAM. The bill covers the tax years 2006/7 to 2012/13.

IR35 is designed to tackle tax avoidance by workers carrying out services via intermediary companies to get out of paying income tax and National Insurance contributions. The court found that Ackroyd was an employee, rather than a contractor, and CAM therefore owes the unpaid to HMRC.

Essentially, if a court rules that the person would have been employed were it not for the intermediary company, they are caught by IR35.

Find out more about what IR35 is and how it affects you as a business owner

The three main tests of employment include: the degree of control the client has over the work; whether a specific worker is required or whether they can be substituted; and whether the employer is obliged to offer work, and the worker obliged to accept.

In Ackroyd?s case, the ruling determined that these three things applied to the engagement:

• Personal service was required (there was no right to substitution)
• The BBC exercised significant control over the work performed by Ms Ackroyd
• There were obligations on both parties (mutuality of obligation) to carry out work and make regular, monthly payments for that work.

Furthermore, CAM was not permitted to seek work with other organisations without the green light from the BBC.

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Why rolling out IR35 into the private sector could be catastrophic for the economy

The Treasury’s hints that IR35 rules could be extended to the private sector are more than unsettling, writes Julia Kermode, chief executive of The Freelancer & Contractor Services Association.

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Ms Ackroyd claimed that the company model was insisted upon by the BBC, and that her accountant has assured her the model was tax compliant. Regardless, the company remains liable for the tax.

Commenting on the case, Andy Chamberlain, IPSE?s deputy director policy, said:??This case is significant for several reasons: it?s the first IR35 ruling for seven years, it has resulted in an extremely large tax bill for an individual, and it shows that the original IR35 legislation, deeply flawed though it is, can be made to work when HMRC actually enforce it.

?The current drive to push all the liability onto the client from the outset is like using a sledgehammer to crack a nut. Last year?s change to the way IR35 works in the public sector has essentially stopped contracting in the sector altogether, robbing it of vital specialist skills and damaging public services.

If the government extends the reforms to the private sector, as it has signalled it wants to, it will damage not only our flexible labour market, but the UK economy as a whole.?

IPSE understands that there are several other BBC engagements under investigation, although the details of these cases are yet to be established.

Find out the ten IR35 risks all freelancers need to be aware of

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