Broadcaster Adrian Chiles loses to HMRC in IR35 appeal ‘riddled with unfairness’

An IR35 win for HMRC over Adrian Chiles on two grounds of appeal isn’t sitting well with IR35 experts -- who have six niggles over its fairness.

Niggle one is that the same HMRC barristers who hit Kaye Adams were set on Chiles, ReLegal Consulting observes today exclusively for ContractorUK.

The second niggle is that while the FTT is a ‘no-costs’ regime (each side pays its own costs), the UT, where Chiles just lost to HMRC, isn’t.

'Doesn't feel like a fair outcome'

In fact, the losing side at the Upper Tribunal has to pay the other side’s costs, says employment tax expert Susan Ball.

“In cases like this,” RSM’s UK tax partner added of Basic Broadcasting Ltd v HMRC at the UT, “[that] doesn’t feel like a fair outcome.”

The third niggle is that at the First-Tier Tribunal in 2022, Chiles already established his “innocence” under the IR35 rules, says Qdos.

'IR35 saga'

“We see this time and time again,” says a frustrated Seb Maley, the IR35 contract review firm’s chief executive.

“A freelancer proves their innocence, only for HMRC to appeal and be granted another hearing.

“In what is yet another IR35 saga, Adrian Chiles must demonstrate [to the FTT] that he is genuinely self-employed -- once more”.

The fourth niggle is the swingeing tax bill the presenter faces if he can’t (again) demonstrate his TV and radio gigs were outside IR35; £1.7million.

The fifth unfairness to IR35 experts is that under the UT’s ruling, Chiles’ case is to be remade by the very party which got it wrong.

'Worrying'

“The worrying thing is that this all stems from a mistake apparently made by one of the [FTT] judges,” says Qdos’ Mr Maley.  

“That’s not to say the UT necessarily think the overall decision is incorrect; just that the way in which…[it] was made wasn’t correct.”

Niggle six about the fairness of the UT’s remittance ruling (relating to BBL’s BBC and ITV contracts of 2012-2017) concerns time.

'The 10-year case now continues on'

Law firm Chartergates observes that, using Atholl House guidance, the FTT by order of the UT must now IR35-assess services provided up to 12 years ago.

And for Chiles, 57, it means a decade under HMRC scrutiny, plus three tribunal hearings and still “the case continues on,” says RSM UK’s Ms Ball.

Even back in 2022, when he used ‘in business on own account’ to win, the probe was seven years in, requiring two hearings over eight days.

'Behind every personal service company is a person'

At the UT hearing on Feb 5-6 2024 (further to written submissions on Feb 20 and March 5), a thought for the high-profile taxpayer was spared, however.

Upper Tribunal Judge Thomas Scott said: “It should not be forgotten that behind every personal service company is a person.

“And, as we have seen in this case, the uncertainty and financial exposures generated by the difficulty in establishing a clear and stable legal position continue to produce a very real human cost.”

'Too heavy a focus on in-business'

So, the UT acknowledged the toll on Chiles, says ReLegal’s Rebecca Seeley Harris, but they still granted HMRC’s appeal.

The full grounds of appeal are outlined on p5 of the UT ruling, but Bauer & Cottrell’s Charlie Hemsworth says, broadly, they were two-fold.

“HMRC’s primary ground of appeal was that the FTT had made legal errors in applying the third stage of the Ready Mixed Concrete (RMC) test.

“Specifically,” continued the Bauer & Cottrell director, “that the FTT focused too heavily on whether Chiles was in business on his own account -- without adequately considering the overall terms of the hypothetical contracts with the BBC and ITV.”

'The Knowledge Issue'

HMRC’s second appeal-ground was the “knowledge issue;” in effect if relevant “matters” were “known” by the BBC/ITV about Chiles’ broader business activities and could be taken into account, says Hemsworth.

Unimpressed, BBL’s legal representative, James Rivett of Clintons LLP argued that HMRC was “attempting to reargue the case.”

Rivett also accused HMRC of trying to “interfere with an evaluative decision” in which the “FTT had correctly directed itself as to the applicable test.”

'The UT found that the FTT erred'

But ultimately Chiles and his legal team were unsuccessful in undermining both grounds of HMRC’s appeal.

Chartergates says: “The UT found that the FTT erred in its approach to the business on…own account test.

“[The FTT did this 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.”

On the ‘knowledge issue,' the UT didn’t blame the FTT but said it was for FTT judge Jonathan Cannan to consider it in remaking the decision.

'IR35 cases are turning on the minutiae'

In wake of Chiles now having to head back to the FTT, Chartergates advises:

“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.”

At Qdos, ‘abundantly clear’ to its CEO is that two technical grounds of appeal succeeding don’t make the UT decision necessarily right, in light of the multiple fairness niggles.

'Disregard'

“In recent months, a lot has been made of how taxpayers – who in many cases are innocent – are treated, whether by HMRC or the inefficient tribunal system,” begins Mr Maley.

“Adrian Chiles is another [high-profile PSC director] to add to this ever-growing list, after Kaye Adams, Gary Lineker, Eamonn Holmes and countless others.

“It speaks volumes of a system with odds stacked against taxpayers, who can’t move on with their lives just in case HMRC is given another bite at the cherry.

“And so this long-running case is another reminder of the importance of IR35 compliance, along with – if I’m honest – the disregard for the individual”.