A dogged HMRC resumes £1.7million IR35 case against Adrian Chiles

Another week and another high-profile IR35 case has hit the headlines. While it feels like 2024 has only just begun, HMRC is already showing dogged determination to tackle what it believes to be non-compliance with the Intermediaries legislation.

Although, I should stress, that what HMRC perceives as non-compliance and what is actually non-compliance are often two quite different things, writes Seb Maley, CEO of IR35 contract review firm Qdos.

Chasing Chiles (still)? It’s HMRC

This time, the tax authority is resuming its pursuit of Adrian Chiles for an estimated £1.7million IR35 liability.

According to HMRC, Chiles had incorrectly operated outside of IR35 in historic engagements, notably for ITV on programmes such as Daybreak and for the BBC, on Radio 5 Live.

Chiles contests this allegation by HMRC covering contracts at both broadcasters spanning five tax years, and indeed, a First-Tier tribunal already agreed with him over HMRC.

However, that ruling has done little to deter the tax office.

What should contractors make of a taxman who doesn’t accept the word of the courts?

There are two takeaways from this:

1. HMRC remains intent on making an example of a household name under the IR35 rules. We’ve seen it with Gary Lineker, Eamonn Holmes and vindicated this month, Kaye Adams.

2. HMRC is showing little regard for the individuals at the heart of these prolonged sagas – I’ll elaborate on that shortly.

Let’s now take a quick look at the Chiles case and its background before moving on to the wider implications for contractors of HMRC’s latest activity on IR35.

Adrian Chiles IR35 case: quick recap of Basic Broadcasting Ltd versus HMRC

Starting from the top, HMRC issued Adrian Chiles with tax bills for football and topical presenting engagements with ITV and for radio engagements with the BBC between the 2012 and 2017 tax years. In total, the tax liability is reported to be around £1.7m.

Chiles was previously employed by the BBC, but in 1996 the organisation “required Mr Chiles to cease his employment with a view to his services being provided” via a limited company, according to the tribunal notes. He subsequently set up Basic Broadcasting Limited and has contracted through it since.

In that time, Chiles provided his services to a “significant number of clients.” As such, the tribunal found that he was “in business on his own account” – a key indicator of genuine self-employment and an outside IR35 engagement.

However, HMRC remains committed to overturning the tribunal’s November 2021 verdict. This will come as no surprise to those who have followed Kaye Adams’s IR35 case which, after ten years, finally came to a close recently.

That lack of comprehension (on HMRC’s part) is partly what is causing the Chiles’ case to drag on. And these lengthy proceedings bring a considerable amount of stress, while also calling into question the taxman’s grasp of his very own rules.

The HMRC appeal of Chiles' outside IR35 ruling began last week…

Speaking at an Upper Tribunal hearing in London last week where HMRC appealed the FTT ruling which went in his favour, Chiles’ lawyer reportedly said that the case has had a “significant toll” on his mental health.

And it’s not just him. Following the conclusion of her IR35 case late last year, Kaye Adams has spoken eloquently about the impact of her ordeal. In a Sunday Times interview, Adams said she felt  “utterly, utterly beaten up” after ten “enormously difficult” years.

While HMRC says it appreciates “there’s a real person behind every case” and has spoken of being “committed to treating all taxpayers with respect,” in these cases its actions have told a different story.

This isn’t unique to IR35 compliance either (even though we now know of two A-list limited company contractors who have been subjected to a decade of IR35 action by HMRC). In fact, the Revenue has faced heavy criticism for its unsympathetic approach to the Loan Charge too.

Contracts pre-dating the OPW rules are still open to HMRC investigation

Other than the disproportionate approach, what else is there to learn from the Chiles’s IR35 case?

While HMRC launched this IR35 investigation into the Radio 5 Live and Daybreak presenter long before the introduction of the Off-Payroll Working rules (also known as ‘IR35 reform’), it’s a useful reminder that HMRC continues to open enquiries into historic contracts. By this, I’m referring to engagements completed before the introduction of the reform.

Crucially, contractors remain liable for any tax liabilities incurred during this time. And, as HMRC has demonstrated with its continued pursuit of Adrian Chiles, pre-reform contracts and tax affairs remain an avenue of active interest in HMRC’s eyes.

Final considerations in wake of Chiles being refired

As such, keeping yourself protected from such an investigation is essential. In other words, contractors must ensure they can evidence their compliance for historic engagements, while insurance can also provide peace of mind and protection should HMRC come calling.