Hypothetical contracts: deducing employment status in tripartite contracts – The Commissioners for HM Revenue and Customs v Atholl House Productions Limited  UKUT 0037 (TCC)
Much of employment law involves having regard to the true nature of relationships, rather than merely that which exists on paper. In our recent article on the Uber case in the Supreme Court, I wrote about how ‘if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck’. In this case, it was the turn of the Upper Tribunal (Tax and Chancery Chamber) to undertake a similar assessment.
For tax purposes, the Income Tax (Earning and Pensions) Act 2003 looks at a person’s considered employment status if they provide work through an intermediary company. The relevant provisions apply where a person provides services, not by a direct contract but through an intermediary, and the circumstances are such that if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.
The factual background
This case involved the daytime television presenter Kaye Adams, probably most notable for her work on ITV on the panel for ‘Loose Women’. However, in this case, it was her work for the BBC presenting ‘The Kaye Adams Show’ which was under review. HMRC claimed that she was, for income tax purposes, employed by the BBC. Ms Adams claimed she was a freelancer.
The First Tier Tribunal and the Upper Tribunal looked first at what is termed the ‘hypothetical contract’. That is, they looked at the contract between Ms Adams and her company, and the contract between the company and the BBC, and established what an individual contract would say.
Next, they considered the famous three-part test in Ready Mixed Concrete (South East) Ltd v. Minister of Pensions and National Insurance,  2 QB 497. This states that a contract of service exists if:
- There is a mutuality of obligation;
- The putative employer has sufficient control over the performance of the work; and
- The other provisions of the contract are consistent with it being a contract of employment.
There was no argument over mutuality of obligation, so the FTT and subsequently the UT went on to look at the other two limbs.
HMRC argued that the BBC had control over Ms Adams’ appearances, and other deployments. They also had control over the content of her programmes and when they aired that it was sufficient to meet the test in Ready Mixed Concrete. As such, with the first and second limbs being met, there was a prima facie indicator of employment.
Other consistent provisions
The reasoning relied on by Ms Adams in this case was that she entered into the hypothetical contract ‘entering into business on her own account’. Her reasoning was that, for 20 years, she had been a freelance presenter and personality, and had similar freelance contracts with ITV, and previously with the BBC.
The UT considered that this represented the reality of the situation and so, agreeing with the FTT though for different reasons, dismissed HMRC’s appeal.