Does the Adrian Chiles IR35 case affect IT contractors?

Since the BBL Vs HMRC judgment landed last week, a lot has been made about whether TV and radio host Adrian Chiles’ £1.7m IR35 tribunal win is likely to impact a typical IT contractor, writes Seb Maley, chief executive of Qdos.

I’ve been one of the many people asking that very question, given that few – if any – IT contractors command fees that rival this well-known presenter’s or have working practices that resemble those he held with the ITV and the BBC.

IR35? Black and white it ain’t

But as is often the case when it comes to IR35, it’s not completely black and white. And while there are plenty of differences between this celebrity broadcaster and the average contractor, there is, of course, a lesson or two IT contractors can learn from another high profile tribunal and another loss for the taxman.

First, to get everyone up to speed. Adrian Chiles’ company, Basic Broadcasting Ltd (BBL), faced the possibility of an income tax bill of £1,249,433 and a national insurance payment of £460,739 after HMRC deemed two contracts he held with ITV and three with the BBC between 2012 and 2017 as inside IR35.

The chilling HMRC, courts experience of Adrian Chiles

Chiles’ appeal was first heard in November 2019 before the pandemic resulted in a two-year delay. This meant the presenter, whose rehearing didn’t take place until November 2021, had the prospect of a massive tax bill hanging over him for more than seven years, given HMRC first launched an IR35 investigation in 2015.

And despite the judge deeming Chiles to be genuinely self-employed, largely based on being ‘in business on his own account’, HMRC does have the right to appeal.

This means, staggeringly, we might not have seen the end of this case just yet!

‘In business on your own account,’ the key

Judging by the court notes, Chiles, like many other presenters who have come up against HMRC, held contracts that on the face of it were a lot closer to being inside IR35 than most contractors.

For example, Mutuality of Obligation (MoO) existed. Substitution wasn’t an option either, meaning Personal Service was ultimately present. And both ITV and the BBC held editorial control over the service BBL delivered too. Regardless, it was judged that Chiles was not working as a disguised employee.

This was due to the presenter showing that he was in-business-on-his-own-account. Factors that showed this included:

• Paying 15% of his fees to a Management Agency,
• Having a Personal Assistant,
• Receiving commission on some projects and;
• Working with 25 different businesses from 2012 to 2017.

But can, say, an IT contractor working a 5-day week contract for six months realistically relate to this? Having more than one client throughout the span of their career, certainly, but a management company? A personal assistant? Commission? Perhaps not. However, that in itself isn’t necessarily anything to worry about. Chiles was found to be outside IR35, after all.

Now, let’s get onto the factors in this tribunal that contractors could draw comparisons from, even if there are only a select few to choose from.

Editorial control was clear but not decisive

In the first hypothetical contract held between BBL and ITV and the first hypothetical contract between BBL and the BBC, control was evident.

As touched on earlier, both broadcasters held final editorial control.

This is often the case in presenting. And in the Chiles case for example, ITV retained the right to choose the football matches that he would present, from where, and the time the programme was shown.

Control being present isn’t an IR35 game-over for contractors

Again, this isn’t uncommon for presenters. But you might argue that it isn’t unusual for some other contractors either, who – whether due to compliance or the sensitive timing of certain work – have little choice over when, where and how, they carry out their services.

Even so, that’s not to say that working under the control of a client, on its own, means a contractor belongs inside IR35. However, it does serve as an important reminder that the right for a client to control a worker – rather than whether or not control is exercised in reality – is the pertinent point when it comes to IR35.

Personal service was unavoidable for Chiles

Another tricky obstacle for presenters to overcome is substitution, particularly when a show relies so heavily on a particular host. Again, no real surprise that Chiles wasn’t able to provide a substitute – often key in evidencing outside IR35 status. And in fairness, the judge did take this into account, alluding to the nature of the industry in which Chiles operates.

However, substitution and in turn, the question of whether an IT contractor delivers a personal service, is a clause that isn’t always accepted by clients in other sectors. Or if it exists in the contract, it’s not always seen as an ‘unfettered right’ or even genuine. Take banking or government contracts -- the need to security-clear a contractor might mean that substitution is something handled by the client, not the contractor (as it was with Chiles).

Finally, the value in picture-painting…

To round up, while there are certainly more differences than similarities between Chiles and a typical IT contractor, there is a valuable lesson to be learned from this case. While Chiles failed the three so-called ‘key’ IR35 status tests, above all else this case is evidence that status is about picture painting – and that each and every aspect of the contract, working practices and indeed, wider business activities of the contractor, must be fully considered.