One of the longest-running IR35 cases has finally drawn to a close and has ruled in favour of Adrian Chiles and his media company, Basic Broadcasting Ltd (BBL).

After a long seven years and two high profile tribunals, Judge Cannan has allowed the appeal relating to services provided by Chiles and his company to the BBC and ITV between 2012 to 2017.

The key findings, in this case, showed that while the contracts created the initial impression of employment, the facts and activities, viewed as a whole, showed that they were contracts for services and not contracts of employment.

As a result of this finding, the IR35 tax rules did not apply to Chiles during this period.

The background 

The first hearing of this case took place in November 2019, an incredible five years after HMRC began it’s investigation.

Overseen by Judge Barbara Mosedale, it was delayed further when she contracted COVID-19 and then suffered from long COVID.

This led to the appeal being partially reheard in November 2021, which led to the latest ruling from Judge Cannan.

During the hearing, the judge heard that Chiles’ career earnings were highly volatile and that he enjoyed a period of high earnings followed by time with next to no income from the BBC or ITV.

It was during this decline that HMRC began their enquiry into his affairs and issued him with a substantial tax bill on their determination that he should have been within the rules of IR35.

The ruling

Judge Cannan stated: “We do not underestimate the effect that the delay in determining the appeal must have had on Mr Chiles. There are significant amounts of tax and NICs at stake and the proceedings must have cast a shadow over his life for much longer than anyone would have wished.”

“The judgment now confirms that – contrary to HMRC’s assessments – there was no underpayment of tax or National Insurance.”

In this case, the tribunal applied the IR35 statute and tests to identify a contract of service based on existing precedent dating back to the 1960s.

This consisted of confirming whether personal service is present, along with sufficient mutuality of obligation and control, together with considering all of the other factors.

This has been the test applied in many of the other high-profile IR35 cases that have taken place in recent years and will likely remain essential to all future challenges as well.

The tribunal said that Mr Chiles was undoubtedly providing his services personally, as it was him that his clients wanted to be on the television.

However, it said, “in the circumstances, we are satisfied that the ITV Contracts involved mutuality of obligation, and the first stage of the test is satisfied for the ITV Contracts and the BBC Contracts.”

As for the element of control, Chiles’ legal representatives argued that where the parties agree in the contract what work is to be done, no relevant right of control can be identified from the fact that the worker can be required to do that work.

They said there was a logical and legal distinction between control exercised by both parties entering into the contract and control exercised under the contract.

The tribunal recognised that argument and accepted it. They said that “the control must be derived from the contract, either the express terms or by implication. Further, we accept the broad proposition that the definition of the services to be provided may affect the extent to which there is control.

“If the services to be provided are defined in detail, there may be less scope for the client to exercise control over what is done, where it is done, when it is done and how it is done.
Much will depend on the nature of the services being provided and the context in which they are provided.”

As for the services provided, the tribunal also indicated that there was little scope for the broadcasters to control or direct what Chiles could be required to do.

However, there was a level of control to consider Chiles an employee of both the ITV and BBC, pursuant to hypothetical ITV contracts. Although control existed, the judge said this was weak and not a compelling factor in determining whether or not the IR35 rules apply.

After a comprehensive examination, the tribunal concluded that: “In all the circumstances, we consider that Chiles is to be treated as entering into the hypothetical contracts as part and parcel of that business. They were contracts for services and not contracts of employment.”

This is a complex and long case, based strongly on the specific facts and, importantly, the wording of the contracts and the nature of control applied to Chiles by the BBC and ITV.

However, it once again clarifies that HMRC’s determinations of whether a person is within or outside of the off-payroll rules are not always accurate or correct.