Christa Ackroyd Media Ltd v Revenue and Customs (INCOME TAX/CORPORATION TAX : Personal service companies (IR 35))

Factual and Procedural Background

This appeal concerns determinations and decisions issued by HM Revenue & Customs ("HMRC") against Company A, a personal service company engaged by Company B, a broadcasting corporation, in respect of income tax and national insurance contributions under the intermediaries legislation (commonly known as IR35). The dispute arises from the tax years 2006-07 to 2012-13 and relates to whether the services provided by the worker through Company A should be treated as employment income under a hypothetical contract directly with Company B.

Company A provided services of a television journalist who had a long-standing media career and worked under fixed term contracts with Company B. The principal contract at issue was a seven-year contract commencing in 2007 and terminating in 2013. HMRC determined that Company A should have accounted for tax and national insurance as if the worker was an employee of Company B under the intermediaries legislation. Company A appealed these determinations.

The appeal also concerns reimbursements made by Company A to the worker for certain expenditures, including a subscription to a pay-TV service and additional home-working costs, with questions about whether such reimbursements qualified for tax relief. Penalties imposed by HMRC were also noted, but these were not the focus of the appeal.

The Tribunal heard oral and written evidence, including from the worker and two other witnesses, and considered a substantial body of caselaw related to employment status and the intermediaries legislation.

Legal Issues Presented

1. Whether, for the purposes of the intermediaries legislation, the worker would be regarded as an employee of Company B under a hypothetical contract directly between the worker and Company B.
2. Whether reimbursements made by Company A to the worker for certain expenditures (Sky TV subscription and home-working costs) qualified for tax relief.

Arguments of the Parties

Appellant's Arguments

• The worker was a self-employed contractor providing services through Company A and not an employee of Company B.
• The contractual arrangements and working practices reflected significant autonomy and control by the worker and Company A, inconsistent with employment.
• The worker was able to undertake other engagements and was not subject to the same controls as employees of Company B.
• The reimbursements for Sky TV and home-working expenses were necessary and wholly, exclusively, and necessarily incurred in the performance of duties and thus qualified for tax relief.
• The length of the contract and performance-related payments reflected business arrangements and not employment status.

Respondents' Arguments

• The hypothetical contract would be a contract of employment because of the mutuality of obligation and the contractual right of control exercised by Company B.
• The worker was subject to editorial standards and guidelines effectively imposed by Company B, indicating control consistent with an employment relationship.
• The worker did not have a right to provide a substitute, which supports employment status.
• The reimbursements were not wholly and exclusively incurred in the performance of duties and included personal benefit, thus not qualifying for tax relief.
• Company A should have accounted for tax and national insurance contributions under PAYE for the reimbursements.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497	Sets out the classic three-part test for contract of service: mutuality of obligation, control, and consistency of contract terms.	The Tribunal applied this test to assess whether the hypothetical contract was one of employment.
Usetech Ltd v Young [2004] EWHC 2248	Discusses the concept of the hypothetical contract in IR35 cases.	Used to frame the issue of whether the worker would be an employee under a direct contract.
Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318	Clarifies that a sufficient framework of control is necessary for employment, even if the worker has autonomy in how work is done.	The Tribunal accepted that control need not be detailed day-to-day supervision but must exist contractually.
Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173	Factors to determine whether an individual is in business on their own account.	Used to assess the worker's economic independence and business status.
Autoclenz Ltd v Belcher [2011] UKSC 41	Focuses on the genuine contractual right of control and the right to provide a substitute.	The Tribunal found no right to substitute and accepted implied control by Company B.
Fitzpatrick v CIR [1994] 1 WLR 306	Clarifies that expenses incurred to enable efficient performance are not necessarily deductible as incurred in the performance of duties.	Applied to deny tax relief for the Sky TV subscription as it was not incurred exclusively in performance of duties.
Various Claimants v Catholic Child Welfare Society [2012] UKSC 56	Distinguishes control over what work is done from how work is done.	Supported the Tribunal’s view that Company B had control over what was done, not necessarily how.
ABC News Intercontinental Inc v Gizbert EAT (2006, unreported)	Confirmed that contracts for a fixed number of days with control and restrictions can be contracts of service despite being described as freelance.	Used to support the conclusion that the hypothetical contract was one of employment.

Court's Reasoning and Analysis

The Tribunal began by framing the principal issue under section 49 ITEPA 2003: whether the worker would be an employee of Company B under a hypothetical contract directly between them. It adopted the classic Ready Mixed Concrete test focusing on mutuality of obligation, control, and contractual consistency.

Mutuality of obligation was accepted as present, with the worker required to provide services for at least 225 days annually and Company B obliged to pay fees accordingly.

Regarding control, the Tribunal found that although the worker had professional autonomy in how she performed her duties—particularly during live broadcasts—the hypothetical contract granted Company B the contractual right to control what services were provided, including directing attendance at events and editing contributions. The Tribunal rejected the worker’s assertion that she had ultimate control over content, noting that editorial responsibility and final decision-making lay with Company B, consistent with its editorial guidelines and contractual terms.

The Tribunal considered the absence of a right to provide a substitute, which was expressly prohibited, as a pointer towards employment but not determinative.

Other factors included the length and stability of the contract (seven years), the worker’s economic dependence on Company B for the majority of her income, and restrictions on outside engagements, all of which supported an employment status under the hypothetical contract.

The Tribunal rejected the argument that the worker was in business on her own account, finding that she did not take significant financial risk or manage a business beyond performing her professional services.

On the issue of tax relief for reimbursements, the Tribunal applied the statutory test for deductions from earnings and relevant case law. It found that the Sky TV subscription was not incurred exclusively in the performance of duties due to an element of personal use, and thus relief was not available. Similarly, no evidence demonstrated that additional home-working costs were reasonable or agreed, so relief was denied.

Overall, the Tribunal conducted a qualitative assessment of all factors and concluded that the worker would be regarded as an employee of Company B under the hypothetical contract for income tax purposes, thereby engaging the intermediaries legislation.

Holding and Implications

The Tribunal DISMISSED THE APPEAL IN PRINCIPLE, holding that the worker would be regarded as an employee of Company B under the hypothetical contract for the purposes of the intermediaries legislation.

This means Company A is liable for income tax and national insurance contributions as if the worker were an employee of Company B. The Tribunal left open the determination of the quantum of tax and national insurance due and any outstanding penalty issues, which may be referred back for further consideration.

The Tribunal also held that Company A was not entitled to tax relief on reimbursements for the Sky TV subscription and home-working expenses, and that these payments should have been subject to PAYE and national insurance contributions.

No new legal precedent was established; the decision applies established principles to the facts of this case and confirms the application of the intermediaries legislation in similar contexts.