IR35 – Upper Tribunal decision in HMRC v Basic Broadcasting Ltd

In this update we consider the Upper Tribunal’s (UT) decision in the IR35 case of HMRC v Basic Broadcasting Ltd (BBL). 

The case concerned HMRC’s appeal against a finding from the First Tier Tribunal (FTT) that IR35 did not apply to the arrangements between BBL and the BBC and ITV.  In constructing the hypothetical contract between Mr Chiles and the BBC and ITV, the FTT found that they were not contracts of employment on the grounds that Mr Chiles was a business on his own account.

HMRC, relying on similar arguments as in the Atholl House case, appealed on the following grounds:

1. that in applying the dicta in Ready Mixed Concrete (RMC), the FTT erred in law by its incorrect application of the ‘business on his own account’ test,
2. that the FTT erred in law and / or considered irrelevant factors in its approach to the ‘business on his own account’ test in relation to the contractual arrangements and,
3. that the FTT, when determining the matter should have considered which, if any of the business on his own account factors, were within the actual or constructive knowledge of the BBC and ITV.

The UT found in favour of HMRC and remitted the matter back to the FTT.  The UT found that the FTT erred in its approach to the business on his own account test by incorrectly focussing on the fact that BBL conducted a business outside of the contracts with the BBC and ITV and that the contracts were entered into in the course of business, rather than focussing on whether Mr Chiles was operating as a business on his own account with respect to the contracts with the BBC and ITV.

With regards to the knowledge issue, the UT found that it was something the FTT should consider when it is reheard.

Summary

We have had a number of IR35 appeal judgments in recent times and what is abundantly clear is that cases are turning on the minutiae and  on nuanced, detailed and focussed points of law and, in particular, how those points of law are applied.  Future judgments will hopefully provide more guidance and, as always, we are on-hand to advise and support.

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