The so-called IR35 rules can treat an individual engaged to provide services to a client through a personal service company (PSC) as an employee of that client when the hypothetical contract which would exist if the individual were engaged directly with the client would be akin to an employment contract (as opposed to a self-employed contract). Where IR35 applies, the PSC has to account for income tax and NICs to HMRC in the same way that an employer would on (most of) the payment received for the services. This case involved the application of the IR35 rules to a BBC presenter providing her services through a PSC. The FTT found in favour of HMRC, that the presenter would have been an employee of the BBC had she contracted with them personally.
This case provides a useful summary of the relevant factors in determining whether or not the IR35 hypothetical contract is equivalent to an employment contract. It is also of note because it is the first IR35 case that HMRC has won in the seven years since the rules were introduced.
The FTT identified the following as being of particular significance in determining whether there would have been a contract of employment:
- the length of the contract;
- who has control of the individual's work;
- other activities the individual is entitled to undertake in addition to their work with that client;
- whether the individual was bound by internal guidelines and policies (in this case, the BBC editorial guidelines); and
- who provided the equipment used to carry out the work.