Christa Ackroyd Media Ltd v Revenue and Customs (INCOME TAX/CORPORATION TAX : Personal service companies (IR 35)) [2018] UKFTT 69 (TC)

FTT-Tax
Christa Ackroyd Media Ltd v Revenue and Customs (INCOME TAX/CORPORATION TAX : Personal service companies (IR 35))
[2018] UKFTT 69 (TC) · 2017-09-28
[2]“ 19. MacKenna J made plain [in Ready Mixed Concrete] that provided (i) and (ii) are present (iii) requires that all the terms of the agreement are to be considered before the question as to the existence of a contract of service can be answered. As to (ii) he had well in mind that the early legal concept of control as including control over how the work should be done was relevant but not essential. Society has provided many examples, from masters of vessels and surgeons to research scientists and technology experts, where such direct control is absent. In many cases the employer or controlling management may have no more than a very general idea of how the work is done and no inclination directly to interfere with it. However, some sufficient framework of control must surely exist. A contractual relationship concerning work to be carried out in which the one party has no control over the other could not sensibly be called a contract of employment. MacKenna J cited a passage from the judgment of Dixon J in Humberstone v Northern Timber Mills (1949) 79 CLR 389 from which I take the first few lines only: ‘The question is not whether in practice the work was in fact done subject to a direction and control exercised by any actual supervision or whether any actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions.’”136. The same point was made by Vinelott J in Walls v Sinnett [1987] STC 236 at p246c in relation to a professional singer who lectured in music at a technical college: “ The other point that was very much stressed by the taxpayer is the modest degree of control which in practice was exercised by the governors and the principal of the college. In some contexts the degree of control exercised may be very important in deciding whether someone is an employee or servant, but in the case of a senior lecturer at a college of further education, more particularly one who like the taxpayer came into teaching from active work as a singer, it is not surprising to find that he was given a very wide degree of latitude in the organisation of his work and time.”137. In identifying whether there is a right of control, the starting point is the express terms of the contract. If the express terms do not answer the question, then it is necessary to consider the implied terms of the contract (see Ready Mixed Concrete at p516A).138. Absence of control as to the detailed way in which work is performed is not inconsistent with the employment of a skilled person (see Morren v Swinton and Pendlebury Borough Council [1965] 1 WLR 576 per Lord Parker CJ at 582A-C; Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374 per Lord Griffiths at 384A; and Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318 per Buckley J at [19]). The significance of control is that the employer can direct what the employee does, not necessarily how he does it (see Various Claimants v Catholic Child Welfare Society & Ors [2012] UKSC 56 per Lord Phillips at [36].139. If the genuine contractual right of control to a sufficient degree does exist, it does not matter whether that right is actually exercised (see Autoclenz v Belcher [2011] UKSC 41 per Lord Clarke at [19]).140. In E v English Province of Our Lady of Charity [2012] EWCA Civ 938 at [76] Ward LJ said that the question of control is not merely about the legal power to control, but that it should be viewed more in terms of accountability and supervision by a superior. That was said in the context of vicarious liability of the Church for sexual abuse by priests. In our view Ward LJ was not suggesting here that the legal power to control was less important.141. Mr Summers relied on the Court of Appeal decision in Cowell v Quilter Goodison & Co Limited (1989) IRLR 392 . That was a case involving an equity partner in a firm of stockbrokers, and it was held that he was not an employee for the purposes of unfair dismissal rules. The Master of the Rolls said that as an equity partner “[he] was not the servant of anyone”. Mr Summers suggested we should look to see whether Ms Ackroyd was a servant and submitted that she was not. However, the Master of the Rolls also described the terms ‘master’ and ‘servant’ as old terms and emphasised that it was the nature of the relationship that was important and not the terminology. We agree with Mr Tolley that in the light of subsequent authorities (see for example Various Claimants v Catholic Child Welfare Society at [36]) the question of whether an individual “looks like a servant” is not a helpful test.142. It was recognised in Ready Mixed Concrete that the right to provide a substitute to carry out work is inconsistent with a contract of service. Again, it is the right to provide a substitute that is relevant. It does not matter that the right in practice was not used (see Autoclenz Ltd v Belcher at [19]). The existence of a right to substitute is not determinative of self-employment (see Usetech Ltd at [53]). Mr Summers also accepted that the absence of a right to provide a substitute may suggest employment, but again it is not determinative (see R (atao Professional Contractors Group Ltd) v IRC per Burton J at [48v]).[143]Long term contracts where the whole or substantially the whole of the individual’s working week is devoted to performing the services tend to suggest employment (see Usetech Ltd at [59]). Hall v Lorimer [ 1992] 1 WLR 939 ; [1994] 1 WLR 209 was a case involving a freelance vision mixer who was found to be self employed. At 945B Mummery J viewed as relevant the degree of continuity in the relationship, how many engagements are performed and whether they are performed mainly for one person. He also considered it useful to consider whether the person performing the services was ‘part and parcel’ of the organisation of the other party. Similarly, at 218C Nolan LJ in the Court of Appeal suggested that the extent to which the individual was dependent upon or independent of a particular paymaster and the duration of engagements may be significant. Further, it is not inconsistent with a contract of employment that the individual is free to work for others (see Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173 at 186G). 144. In Market Investigations Ltd , Cooke J suggested at 184G that the question of whether a worker is an employee could be answered by determining whether the individual who performs the services is performing them as a person in business on his own account. There is no exhaustive list of factors, but he identified a number of relevant factors at 185A-B as follows:(1) whether the worker provides his own equipment;(2) whether he hires his own helpers;(3) what degree of financial risk he takes;(4) what degree of responsibility for investment and management he has; and(5) whether and how far he has an opportunity of profiting from sound management in the performance of his task 145. Financial risk involves the ability to earn a profit or make a loss from how the work is performed (see for example Global Plant Ltd v Secretary of State for Social Security [1972] 1 QB 139 per Lord Widgery at 152). In this context, the risk only of not being able to find alternative employment is not a relevant factor as it is a risk shared by all casual employees (see Lee Ting Sang v Chung Chi-Keung at 384D). 146. In the case of a profession or vocation the question of whether the individual is in business on his own account may not be very helpful. In such cases a significant factor may be the extent to which the worker is dependent upon the client for financial exploitation of his talents; conversely whether the worker is able to exploit his talents in the wider market and to a number of clients (see Hall v Lorimer per Nolan LJ at 218). 147. It is not appropriate to adopt a mechanistic or ‘check list’ approach. Different factors will have difference significance and weight in each case. Having considered all the relevant factors, it is necessary to stand back from the detail and make a qualitative assessment of the facts as found (see Hall v Lorimer per Nolan LJ at p216, approving the views of Mummery J in the High Court). 148. Each case must be determined on its own facts. However, Mr Tolley relied on a decision of the Employment Appeal Tribunal in ABC News Intercontinental Inc v Gizbert EAT (21 August 2006) (unreported) . The EAT concluded that a contract which provided for ABC to provide 100 days’ work to an experienced journalist, or at any event 100 days’ pay at agreed rates, involved mutuality of obligation (see [21]-[22]). It also concluded that the contract was one of service, notwithstanding the purported description of the contract as for the provision of freelance services. The conclusion took into account, amongst other matters the degree of control exercised, the individual’s place within the organisation, the restrictions on working for competitors and a requirement to keep the company informed of commitments outside the agreement (see [23]). 149. Mr Summers referred us to a number of decisions of the Special Commissioners and the First-tier Tribunal , albeit they are not of course binding on us. He referred us to Lewis t/a MAL Scaffolding v Revenue & Customs Commissioners [2006] STC (SCD) 253 , Paya Ltd v HMRC [2016] UKFTT 660 (TC) and Tomlinson v Revenue & Customs Commissioners [2017] UKFTT 0489 (TC) . Paya Ltd was a similar case to the present involving BBC presenters but the decision concerned a procedural point which does not assist us, although incidentally it does indicate the BBC’s position of not wishing to be aligned with HMRC or the appellant. Lewis and Tomlinson were both decided on their own facts, applying the authoritative principles set out by the higher courts to their own facts. Again, they do not give us much assistance. (2) The Hypothetical Contract 150. In identifying the terms of the hypothetical contract the stated intentions of the parties, in this case Ms Ackroyd, CAM Ltd and the BBC, cannot prevail over the true legal effect of the actual agreements. This point was considered by Henderson J in Dragonfly Consultancy Ltd v Revenue & Customs Commissioners [2008] EWHC 2113 (Ch) as follows:
“ 53. … statements by the parties disavowing any intention to create a relationship of employment cannot prevail over the true legal effect of the agreement between them. It is true that in a borderline case a statement of the parties' intention may be taken into account and may help to tip the balance one way or the other: see Ready Mixed Concrete ( [1968] 2 QB 497 at 513) and Massey v Crown Life Insurance Co [1978] 2 All ER 576 , [1978] 1 WLR 676 . In the majority of cases, however, such statements will be of little, if any, assistance in characterising the relationship between the parties. 55. I would not, however, go so far as counsel for HMRC who submitted that, as a matter of law, the hypothetical contract required by the IR35 legislation must be constructed without any reference to the stated intentions of the parties. If the actual contractual arrangements between the parties do include statements of intention, they should in my view be taken into account, and in a suitable case there may be material which would justify the inclusion of such a statement in the hypothetical contract. Even then, however, the weight to be attached to such a hypothetical statement would in my view normally be minimal, although I do not rule out the possibility that there may be borderline cases where it could be of real assistance.” 151. There was no issue between the parties that the hypothetical contract with which we are concerned in the present appeal is based on the terms of the Contract, with Ms Ackroyd herself agreeing to provide those services to the BBC on the terms set out in the Contract. We are satisfied that the hypothetical contract contained the following terms derived from the Contract: (1) The contract was for a term of 7 years pursuant to clause 2, terminable only pursuant to clause 13. (2) Ms Ackroyd was contractually obliged to perform the services in clause 3 and the BBC was contractually obliged to pay the fees set out in the payment Schedule in monthly instalments. If Ms Ackroyd failed to perform the services including a minimum of 225 days for Look North then the fees would reduce proportionately. (3) The BBC was not bound to call on the services of Ms Ackroyd but it remained liable to pay the fees pursuant to clause 6 where it did not. (4) The BBC was entitled to edit Ms Ackroyd’s contributions to Look North and other contributions pursuant to clause 5. (5) Travel and subsistence expenses would be reimbursed as for freelance contributors, together with a clothing contribution of £3,000 per year. (6) There were no set hours or set working days, subject to Ms Ackroyd being available to present Look North at 6.30pm as required by the BBC. There was no set location where Ms Ackroyd would work, either in the studio or on an outside broadcast. (7) Ms Ackroyd was subject to the restrictions in clause 8 and clause 9. Otherwise she was entitled to undertake other paid or unpaid activities outside the BBC. (8) Ms Ackroyd was not contractually bound by the Editorial Guidelines. She did not have an identified line manager and was not subject to formal appraisal procedures. (9) Ms Ackroyd had no right to provide a substitute to perform the services and was expressly prohibited from doing so by clause 18. (10) There was no express provision for payment of holiday pay, sick pay or pension entitlement. 152. Mr Summers submitted that there were also terms of the hypothetical contract as follows: (1) Ms Ackroyd would control stories covered, how they would be presented, who should be interviewed and whether there should be an outside broadcast. (2) Ms Ackroyd could make such changes to the Look North format as she wanted. (3) Ms Ackroyd could develop human interest stories of her own for future screening. 153. Based on our findings of fact we are not satisfied that these were terms of the hypothetical contract. These were matters in which she was subject to direction by the BBC. 154. Mr Summers also relied on the intentions of the parties that Ms Ackroyd should be employed by CAM Ltd and not by the BBC. We have found that was the intention of the parties. The services provided by Ms Ackroyd are described in Clause 3 as “freelance services”
. However, for the reasons which follow we do not regard this as the borderline case that Henderson J had in mind when he suggested that the intentions of the parties may tip the balance. 155. The burden is on CAM Ltd to establish facts that support its case that the hypothetical contract was a contract for services and not a contract of service. Ms Ackroyd criticised HMRC for the fact that during their enquiry they declined to approach certain BBC employees who would have been able to confirm facts to support her case. However, CAM Ltd could have adduced evidence from those persons in the present proceedings, obtaining a witness summons if necessary. The same applies to Mr Summers criticism of HMRC for not calling Mr Pannett to give evidence. If he considered that Mr Pannett had material evidence to give then again CAM Ltd could have applied for a witness summons. 156. The task we have to perform in deciding the principal issue in this appeal is essentially a balancing exercise taking into account all the factors described above. Some factors will have more weight than others. (3) Mutuality of Obligation 157. It was not in dispute that a pre-requisite for a contract of employment was present, namely mutuality of obligation. Ms Ackroyd was required to work for the BBC for at least 225 days in any one year, and the BBC was required to pay the fees set out in the Contract. Mr Summers submitted that this was a neutral factor. We agree it is not a factor which points one way or the other. It is the “irreducible minimum” which must be present if a contract is to be construed as a contract of employment. We are satisfied that it is present in the hypothetical contract. (4) Control 158. HMRC confirmed their determinations and decisions in a letter dated 19 August 2016. In that letter the right of control was described as a “crucial factor”. In submissions to us Mr Tolley relied on control but he accepted that the BBC could not control the words which Ms Ackroyd chose to use during a live television programme. He submitted that she was given and exercised a professional discretion which was not inconsistent with control over Ms Ackroyd’s work residing with the BBC. 159. Mr Tolley submitted and we accept that it is a necessary premise of clause 1 of the Contract that Ms Ackroyd was subject to the control of CAM Ltd. It states in terms that “ The Company [CAM Ltd] controls the services of Christa Ackroyd ”. It is clearly possible therefore to control someone in the role Ms Ackroyd was performing at the BBC. 160. Clause 3 of the Contract gave the BBC first call on the services of Ms Ackroyd “as it may require”. We consider that the reference to what the BBC may require was a reference to such of Ms Ackroyd’s services that it may require, whether as presenter, reporter or providing reasonable ancillary services, for example assisting with the editing of material. The BBC could direct which of those services it required Ms Ackroyd to perform. The BBC could also require Ms Ackroyd to attend and represent the BBC at public events pursuant to clause 3.3. 161. Ms Ackroyd’s evidence was that she would never have entered into a contract with the BBC if it meant that the BBC would control the way in which she worked. However, we are concerned with the hypothetical contract. At most this has only marginal relevance in a finely balanced case as a statement of intention. 162. Ms Ackroyd maintained that the BBC was obliged to accept and act upon her suggestions. We do not accept that evidence. There is no express term to that effect in the Contract. Further it is inconsistent with the terminology used by Ms Ackroyd when describing her role in her witness statement. We have found that the Editorial Guidelines were not incorporated as terms of the hypothetical contract, but they do form part of the context in which we must construe the hypothetical contract. In our view it would be inconsistent with the Editorial Guidelines if Ms Ackroyd were to have control over the content of Look North or her contribution to the programme as submitted by Mr Summers. It seems unlikely to us that the BBC would give Ms Ackroyd an entirely free role in Look North without at least an expectation that in carrying out her work she would abide by the Editorial Guidelines. It was not necessary for the BBC to bind Ms Ackroyd contractually to the Editorial Guidelines because it was entitled to direct what work she did and how she did it. Much would be left to her professional judgement but if the BBC considered that she was breaching the Editorial Guidelines in a material way then in our view it could direct her to work in a way consistent with the Editorial Guidelines. 163. We accept that the BBC did implement changes suggested by Ms Ackroyd, but there is no evidence that Ms Ackroyd would have the last word on the implementation of changes. There are no real examples of her having the last word, except in one instance where there was a difference of opinion as to how she should describe three murder victims. We do not consider that example carries much weight. 164. We are not satisfied that as a matter of contractual obligation the BBC was in any sense required to act on Ms Ackroyd’s direction. If that was the intention of the parties at the time the Contract was negotiated then we have no doubt that express provision would have been made to that effect. In practice, the BBC did act on Ms Ackroyd’s advice and suggestions. That is because she was an experienced, professional and successful television journalist and presenter. CAM Ltd was engaged and the contract renewed because Ms Ackroyd possessed such qualities. 165. Mr Summers relied on the fact that Ms Ackroyd had no line manager and was not subject to the BBC appraisal procedure. Looked at in isolation this may suggest that the BBC did not control Ms Ackroyd’s work. Looked at in context, however, for the reasons given we are satisfied that the BBC did have ultimate control over what work Ms Ackroyd did and how she did it. There was no evidence of examples where they exercised such control but we consider that as a matter of contract they were entitled to do so. It is consistent with the fact that the BBC were expressly entitled to edit Ms Ackroyd’s contributions. 166. Mr Summers submitted that HMRC viewed Ms Ackroyd’s role pursuant to the hypothetical contract as simply a newsreader. He accepted that if that were a true reflection of her work then she would properly be treated as an employee pursuant to the hypothetical contract. We accept that her role was much more than simply presenting the news and reading a script. Indeed, Mr Tolley acknowledged as much. 167. Mr Summers rightly submitted that the contract had no express term dealing with control. Control of Ms Ackroyd’s work pursuant to the hypothetical contract must lie somewhere, either with Ms Ackroyd or with the BBC. We are not satisfied that it lay with Ms Ackroyd. We consider that the BBC did have ultimate control in how, where and when Ms Ackroyd carried out her work. We accept a submission by Mr Tolley that this was an implied term of the hypothetical contract in order to give that contract business efficacy. In the context of Ms Ackroyd’s role it was necessary for the BBC to at least have the power to direct Ms Ackroyd’s work, otherwise Look North as a programme ran the risk of not complying with the Editorial Guidelines. For example, if Ms Ackroyd consistently failed to comply with the Editorial Guidelines, it is inconceivable that the parties intended that the BBC should be obliged to continue to pay Ms Ackroyd for her work even if as a result she was not called on to present Look North. (5) Other Relevant Factors 168. There was no right pursuant to the hypothetical contract for Ms Ackroyd to provide a substitute. In fact, the hypothetical contract went further and expressly provided that Ms Ackroyd could not provide a substitute. We accept Mr Summers submission that this is not determinative of the issue and Mr Tolley did not suggest that it was determinative. Mr Summers acknowledged that it was a pointer towards an employment contract. We agree that it points towards employment, but it is not a significant factor. In the context of the anchor of a current affairs programme, whether or not that person is self-employed it is unlikely that they would be entitled or expected to provide a substitute save possibly where production of the actual programme was being contracted out. That was not the position here. 169. Ms Ackroyd was inevitably seen as a part of the BBC because she presented a nightly news and current affairs programme. However, an external observer would not know the details of the hypothetical contract. Ms Ackroyd had a BBC email address and for example she received the round robin email from Mr Thompson. She attended training seminars. We accept that anyone approaching the BBC to engage her services would be directed to Ms Ackroyd. Further, it was known to those she worked with that she was entitled to undertake outside activities, although they did not necessarily know on what terms. It seems to us that Ms Ackroyd was to some extent part and parcel of the BBC, but we do not consider this to be a significant factor in this case. 170. It is a relevant factor that Ms Ackroyd had the benefit of a 7 year contract. This was unusual at the BBC. Mr Summers’ argued that the length of the Contract simply reflected the BBC’s desire to tie Ms Ackroyd to a lengthy contract because of the value she added to Look North, and did not reflect the fact that they regarded her as an employee. We do not accept that submission. Whether the BBC regarded Ms Ackroyd as an employee is of marginal relevance, and in any event we are not satisfied that they did. She could not be an employee because the BBC had contracted with CAM Ltd. There is no suggestion that the Contract could ever have established Ms Ackroyd as an employee, unless it was a sham which has never been suggested. Indeed, we have found that the BBC wanted to contract with a personal service company to avoid any possibility of Ms Ackroyd being an employee. In our view a hypothetical contract of that length for at least 225 days per year and terminable only for a material breach points towards a contract of employment. The existence of a 7 year contract meant that Ms Ackroyd’s work at the BBC was pursuant to a highly stable, regular and continuous arrangement. It involved a high degree of continuity rather than a succession of short term engagements. That is a pointer towards an employment contract. 171. We do not consider that the fact the fees were payable on a monthly basis akin to the way an employee might be paid is significant. Nor is the absence of any provision for holiday, sick pay or pension entitlement. The Contract was between CAM Ltd and the BBC and both parties accept that the Contract was not an employment contract. It would not be expected to contain such provisions. Mr Tolley suggested that as a “worker” Ms Ackroyd would have a statutory entitlement to such rights, but he accepted that did not assist the Respondents in establishing whether Ms Ackroyd was an employee. Mr Summers relied on the fact that if Ms Ackroyd had been an employee then she would have been entitled to employment rights on the eventual termination of the Contract. Again, this is not a relevant factor because the BBC and CAM Ltd were governed by the Contract, and not the hypothetical contract. 172. The authorities suggest that it may be helpful to consider whether Ms Ackroyd was in business on her own account. Mr Summers submitted that under the hypothetical contract Ms Ackroyd should be seen as being in business on her own account. In particular he relied on the fact that she was able to profit from sound management of her business because she was entitled to “success payments” of £15,000 per year if the ratings of Look North were consistently and significantly in excess of those for ITV’s Calendar. 173. It was not realistically possible for Ms Ackroyd to make a loss in performing the Contract. She could increase her income by way of the success fee. We do not regard that result as being referable to sound management of a business, but from sound performance of her role in Look North. We are satisfied that the success of Look North was in large measure due to the changes Ms Ackroyd drove, her performance as a journalist and presenter and the contributions of other team members. As such Ms Ackroyd was not managing a business, but performing her significant role in the team to a high standard. 174. Ms Ackroyd was entitled to payment of an additional fee of £7,500 for each 6 month period in which the ratings of Look North exceeded those of Calendar. Mr Tolley referred to this as a “bonus” whereas Ms Ackroyd preferred to describe it as a “success fee”. The terminology is not important. It was a performance related payment amounting to approximately 9% of the principal fee payable at the beginning of the Contract in 2007. We consider that such a performance payment is a neutral factor in our decision. It is certainly not inconsistent with a contract of employment. 175. To a limited extent Ms Ackroyd did provide her own equipment. She used her own laptop and mobile phone. That is not unusual in the case of an employee. She also had her own Sky subscription. Otherwise she used BBC equipment to produce her contributions to Look North. It was not suggested that she invested in her business, other than the investment of her own expertise. Nor was there significant management of any such business. She performed professional services but she did not profit from sound management of a business nor did she take any financial risk as such. The amount of other work she performed for payment was very small compared with the fees she received by virtue of the hypothetical contract. It was not a case of managing a number of separate contracts in addition to the hypothetical contract. The most significant example of other activities was Ms Ackroyd’s contract with Express Newspapers but this was terminated at the time she entered into the Contract. 176. We do not consider that Ms Ackroyd could fairly be described as being in business on her own account. She was economically dependent on the hypothetical contract with the BBC which took up most if not all of her working time. 177. There were restrictions as to what other work Ms Ackroyd could do, subject in some circumstances to consent from the BBC. We are satisfied that those restrictions did not in practice prevent Ms Ackroyd from undertaking various outside activities that she wished to pursue, at least until 2013 prior to termination of the Contract. However, the fact remains that those restrictions were part of the hypothetical contract. The BBC could refuse permission for any reason and was not obliged to give reasons. 178. Mr Summers relied on a submission that certain well known presenters at the BBC were permitted to work for other broadcasters. We had no evidence as to the terms on which those presenters were contracted to the BBC and we do not consider that this adds anything to Ms Ackroyd’s case. Overall Assessment 179. We must consider all the factors above and the relative weight attaching to those factors. In our view the most significant factors in the present case include the fact that the BBC could control what work Ms Ackroyd did pursuant to the hypothetical contract. It was a 7 year contract for what was effectively a full time job. Standing back and making an overall qualitative assessment of the circumstances we consider that Ms Ackroyd was an employee under the hypothetical contract . If the services provided by Ms Ackroyd were provided under a contract directly between the BBC and Ms Ackroyd, then Ms Ackroyd would be regarded for income tax purposes as an employee of the BBC. 180. We acknowledge that this is a value judgement. It is in the nature of a value judgement that different people may come to different conclusions. We do not criticise Ms Ackroyd for not realising that the IR35 legislation was engaged. She took professional advice in relation to the contractual arrangements with the BBC and she was encouraged by the BBC to contract through a personal service company. Tax Relief for Expenditure 181. CAM Ltd reimbursed Ms Ackroyd for the costs of her subscription to Sky TV in tax years 2007-08 to 2011-12. The average cost in those years was approximately £750 per year. Mr Sutcliffe and Mr Biggin who prepared Ms Ackroyd’s accounts and self-assessment tax returns were content for tax relief to be claimed in relation to these sums. 182. The BBC did not require Ms Ackroyd to have a subscription to Sky TV. The subscription covered various sky channels including Sky Sport and Sky Movies. Ms Ackroyd said that she “deemed it necessary to have access to news and sport”. Sport and popular culture was part of the Look North programme. For example, she considered it necessary to know how the Yorkshire County Cricket team was doing. She did not accept that the subscription was in part for personal use. Ms Ackroyd’s evidence was that she would not often watch television with her husband. She would go to a separate room keeping abreast of news and current affairs. 183. Mr Summers argued that Ms Ackroyd’s role and working pattern meant that it was necessary for her to have a Sky TV subscription. She was a journalist and not just a newsreader. She needed to keep up to date on current breaking news and to research stories with a regional angle. 184. We accept that Ms Ackroyd watched Sky TV in the way she described but we do not accept that there was no element of personal use and enjoyment. It seems likely to us and we are satisfied that at least part of the reason for having a Sky TV subscription was for Ms Ackroyd and her husband to enjoy watching the content at leisure. 185. It was common ground that the reimbursement of Ms Ackroyd’s liability to Sky constituted earnings for the purposes of PAYE and NIC pursuant to section 62 ITEPA 2003. CAM Ltd did not treat the payments as such. The issue arising is whether CAM Ltd was entitled to treat the payments as being subject to relief pursuant to section 336 ITEPA 2003 which provides as follows: “ (1) The general rule is that a deduction from earnings is allowed for an amount if— (a) the employee is obliged to incur and pay it as holder of the employment, and (b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.” 186. In Fitzpatrick v CIR [1994] 1 WLR 306 the House of Lords was concerned with journalists claiming relief for the cost of purchasing newspapers. It was held that relief was not available. Lord Templeman said this: “ … in the present cases it seems to me that a journalist does not purchase and read newspapers in the performance of his duties but for the purpose of ensuring that he will carry out his duties efficiently… A journalist who reads newspapers does so in order to be able to perform his duties to the highest possible standard but he does not read in performance of his duties.” 187. There is no evidence that CAM Ltd required Ms Ackroyd have a subscription to Sky TV. More significantly, we are not satisfied that the amounts spent by Ms Ackroyd were incurred exclusively in the performance of her duties as an employee of CAM Ltd. They were incurred for the purpose of ensuring that she could carry out her duties efficiently. We are also satisfied that Ms Ackroyd’s object in subscribing to Sky TV included obtaining the private benefit for herself and her husband of being able to watch the content at leisure (see Mallalieu v Drummond [1983] 2 AC 861 and MacKinlay v Arthur Young McClelland Moores & Co [1990] 2 AC 239 ). 188. We are satisfied therefore that CAM Ltd ought to have treated the payments to Ms Ackroyd as being subject to PAYE and NIC. 189. CAM Ltd also made payments to Ms Ackroyd said to be additional household expenditure arising from the fact that Ms Ackroyd had to work from home. 190. We are satisfied that Ms Ackroyd had no desk or computer at the BBC offices and that she regularly worked from home. She is a journalist and she has an office at home which she calls ‘the snug’. This is where she would write her newspaper column and work on stories for Look North. She received secretarial support paid for by CAM Ltd. She would use the snug as a base to do her work for the BBC and for her small number of other clients. 191. During the enquiry HMRC required information from CAM Ltd by way of a notice pursuant to Schedule 36 Finance Act 2008. That information included details of the arrangements between Ms Ackroyd and CAM Ltd for home working, together with details of the additional household costs incurred by Ms Ackroyd from working at home. The information was not provided. 192. Section 316A ITEPA 2003 provides as follows: “(1) This section applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of the employment at home under homeworking arrangements. (2) No liability to income tax arises in respect of the payment. (3) In this section, in relation to an employee— “homeworking arrangements” means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and “household expenses” means expenses connected with the day to day running of the employee’s home.” 193. There was no evidence of any conscious agreement between CAM Ltd and Ms Ackroyd in relation to her homeworking arrangements. More importantly there was no evidence as to the additional costs incurred by Ms Ackroyd as a result of working from home. In those circumstances we are not satisfied that relief under section 316A was available. CAM Ltd ought to have treated the payments to Ms Ackroyd as being subject to PAYE and NIC. Conclusion 194. For the reasons given above we dismiss the appeal in principle, subject to: (1) any reference to the Tribunal in relation to the quantum of the determinations and decisions concerning the intermediaries legislation, and (2) any issues which remain outstanding in relation to penalties. 195. The parties shall inform the Tribunal in writing within 42 days from the date of release of this decision whether they wish the Tribunal to determine either of these matters in which case we will give further directions. 196. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JONATHAN CANNAN TRIBUNAL JUDGE RELEASE DATE: 10 FEBRUARY 2018 APPENDIX Extracts from the Contract 1. THE COMPANY The Company controls the services of CHRISTA ACKROYD (‘the Broadcaster’) and agrees to provide the services of the Broadcaster to the BBC and further agrees with the BBC that it shall observe and perform and (where appropriate) shall ensure that the Broadcaster observes and performs the terms and conditions of this Agreement. 2. TERM This Agreement shall (subject to any other terms providing for prior termination) be for a period of Seven Years from the First day of January Two Thousand and Seven to the Thirty First day of December Two Thousand and Thirteen (‘the Term’). 3. SERVICES During the Term the BBC shall (subject to reasonable notice) have first call on the freelance services of the Broadcaster (including acting as presenter reporter and reasonable ancillary services normally associated with such a role) as it may require to the output of the BBC, to include in particular:- 3.1 up to Two Hundred and Twenty Five (225) days in each year of this Agreement for the output of BBC Yorkshire 3.2 such days as may be mutually agreed for BBC radio stations in the North region 3.3 attendance at/representation of the BBC at such public events as required by the BBC 3.4 such other contributions as shall be mutually agreed. 5. MORAL RIGHTS The Company grants the BBC the unlimited right to edit copy alter add to take from adapt or translate all the Broadcaster’s contributions made under this Agreement and warrants that the Broadcaster has waived irrevocably any ‘moral rights’ which he may have now or in the future …. 6. FEE 6.1 In respect of the services of the Broadcaster the rights granted under Clause 4 above and the waiver given in clause 5 above the BBC shall pay to the Company the sums set out in the Schedule hereto during the term which sums exclusive of VAT shall be payable by equal monthly instalments not later than 14 days after the end of the relevant month. 6.2 In the event of the Broadcaster failing for any reason to render the services under this Agreement the payment shall (unless the BBC otherwise decides) be reduced by an amount proportionate to the period during which the Broadcaster failed to render the services. 7. EXPENSES 7.1 The Company shall be entitled to the appropriate BBC travel and subsistence payments for freelance contributors. 7.2 The BBC shall make a contribution of up to Three Thousand Pounds (£3,000) in each contract year to the Broadcaster in respect of the purchase of suitable clothing … subject to the supply of suitable receipts. Beyond this contribution the Broadcaster will be required to provide appropriate contemporary clothing for carrying out the services … 8. ENGAGEMENTS FOR THIRD PARTIES 8.1 During the Term the Broadcaster shall not without the prior written consent of the Head of Regional and Local Programmes, BBC Yorkshire (referred to hereafter as ‘the BBC Representative’ ….) provide services of any kind in respect of any form of television or radio intended for audiences in the United Kingdom of Great Britain and Northern Ireland and the Republic of Ireland or for on-line services for any party other than for the BBC. 8.2 The Broadcaster shall not provide her services for publications of any kind for any party other than the BBC without first obtaining the prior written consent of the Head of BBC Yorkshire. 9. CONFLICTS OF INTEREST 9.1 The Company acknowledges that the BBC under its Agreement with the Secretary of State for Culture Media and Sport has given certain undertakings in relation to Programme Standards including in particular impartiality and accordingly agrees in furtherance of the mutual interest of the BBC and the Broadcaster that the Broadcaster will not engage in any conduct which compromises or calls into question the impartiality or integrity of the BBC or any of its programmes or the Broadcaster and in particular without limitation thereto the Broadcaster will not without the prior written consent of the BBC Representative 9.1.1 be involved or associated in any way with any person or organisation which has a trading relationship with the BBC its subsidiaries or associates or which is itself or in association with others in competition with the BBC its subsidiaries or associates or which is tendering for work from or which supplies goods or services to the BBC its subsidiaries or associates 9.1.2 provide training in how to be interviewed for radio or television# 9.1.3 be publicly associated with the work of any charity or government initiative … 11. WARRANTIES The Company warrants that:- 11.1 there is no other contract or engagement or other reason (including prior conduct) which would inhibit or prevent the Broadcaster from entering into or fulfilling the terms of this Agreement 11.2 the Broadcaster’s contributions under this Agreement are and will be the Broadcaster’s original work and do not and shall not contain anything which is an infringement of copyright or related rights or which is defamatory or which may bring the BBC into disrepute … 12. INDEMNITY The Company shall at all times keep the BBC fully indemnified in respect of any consequences which may ensue upon breach of any of the warranties given by the Company pursuant to Clauses 11 and 5 hereof 13. TERMINATION 13.1 If the Company or the Broadcaster shall commit a material or irremediable breach of this Agreement … then the BBC shall have the right to terminate this Agreement forthwith … 14. ENHANCEMENT OF REPUTATION The BBC shall not be obliged to call on the services of the Broadcaster hereunder or to use all or any of the Broadcaster’s contributions and if it does not do so it shall not be liable to the Company or to the Broadcaster for any loss or damage suffered by the Company or the Broadcaster … 18. ASSIGNMENT The Company shall not assign transfer charge or deal in any other manner with this Agreement or sub-contract any or all of the Broadcaster’s obligations under it. … THE PAYMENT SCHEDULE (referred to in clause 6.1) A 1 st January 2007 to 31 st December 2007 One Hundred and Sixty Three Thousand Two Hundred and Thirty Three Pounds (£163,233) which shall be payable via equal monthly instalments in arrears [B-G contain provision for annual increases (if any) in the Retail Prices Index in the previous year up to 1 st January 2013 to 31 December 2013] H In addition the BBC agrees to make payment to the Company of Seven Thousand Five Hundred Pounds (£7,500) at the end of June and the end of December in each year of this Agreement SUBJECT TO the programming of the Broadcaster consistently and significantly exceeding the ratings of its commercial competition (in the opinion of the BBC) over the relevant preceding Six Month period. which sums are all expressed as exclusive of VAT.

Cited in 5 later judgments