HMRC success in overturning Adams IR35 decision

• In the case of Atholl House Ltd v HMRC [2022] the Court of Appeal (“CoA”) disagreed with earlier judgements finding that, Ms Adams of Atholl House Ltd (“AHL”) would have been an employee of the BBC
• The appeal relates to two tax years (2015/16 to 2016/17) and both the First Tier Tribunal and the Upper Tribunal (“UT”) initially upheld Ms Adams appeals against HMRC’s PAYE and National Insurance determinations
• HMRC appealed the UT’s decision on two grounds;
  • Firstly, on the basis that it considered the UT had erred in its application of the third stage of the Ready Mixed Concrete test which relates to the extent of control under hypothetical contracts
  • Secondly, if the UT was entitled to apply the test of “in business on your own account”, it failed to take into account relevant considerations and took into account irrelevant considerations in its approach to that issue in relation to the hypothetical contracts
• The CoA set aside the UT’s decision and ordered that a full assessment is undertaken as to whether, under the hypothetical contracts, there would be an employment relationship between Ms Adams and the BBC

See full case here.

See our previous news here.

Aspire Comment

This case continues to demonstrate the complexity in determining whether IR35 applies and the multitude of factors that must be considered on a case-by-case basis. We expect the number of cases in relation to IR35 will only increase as a result of the extension to the off-payroll reforms into the private sector in April 2021. HMRC’s light touch approach to penalties has also come to an end now, meaning that we are likely to see more and more IR35 challenges in both the public and private sectors.

Make sure you get in touch with Aspire if you have any IR35 training requirements or would like to discuss an ongoing IR35 enquiry with us.