The Commissioners for HMRC v Atholl House Productions Limited

Mutuality of obligation and sufficient control are necessary, but not sufficient, conditions for a contract of employment. Once established, the court must make a multi-factorial assessment of the whole relationship. There is no presumption of employment, and the degree of control remains relevant.

The assessment centres on the contract and the admissible factual matrix known or reasonably available to both parties when it was made. An established freelance business may be relevant but is not decisive. Earlier dealings may form part of the factual matrix; later events cannot determine status retrospectively.

The purposive approach used to identify protected workers does not govern the common-law meaning of employee under section 49 of the Income Tax (Earnings and Pensions) Act 2003.

HMRC determined that the intermediaries legislation applied to services supplied by a presenter's personal service company to the BBC during two tax years. The First-tier Tribunal allowed the company's appeals, having disregarded contractual provisions giving the BBC first call on the presenter and restricting outside engagements.

The Upper Tribunal, in [2021] UKUT 37 (TCC), restored those provisions but nevertheless held that the hypothetical engagements were not employment contracts because the presenter entered them in the course of an established freelance profession. HMRC appealed. The company relied on a respondent's notice concerning the written terms and control.

The central issues were the factors admissible at the third stage of the employment-status test, the relevance of an existing freelance career, and whether the approach in Autoclenz could displace the written contractual terms in an IR35 case.

1. Appeal allowed and decision set aside. The Upper Tribunal's assessment of employment status was legally flawed. The case required remittal because neither tribunal had performed the necessary overall assessment on a correct basis. The findings of sufficient mutuality of obligation and control remained undisturbed.

2. The Ready Mixed Concrete and Hall v Lorimer approaches are not competing tests. Mutuality of obligation and sufficient control are necessary preconditions to employment. If they exist, the tribunal must identify and evaluate all relevant factors. Satisfaction of the first two conditions creates no legal presumption of employment. Their nature and strength, including the degree of control, remain relevant to the overall evaluation.

3. The enquiry is not confined to the express and implied contractual terms. It centres on the contract, its effects and the circumstances existing when it was made which were known or reasonably available to both parties. Knowledge that the individual conducts an established freelance business may therefore be relevant, but its weight is evaluative and it cannot replace analysis of the disputed engagement.

4. The Upper Tribunal wrongly treated the presenter's other independent work as a standard against which the BBC engagements were measured. Similar services may be performed as an employee and as an independent contractor, even during the same period. The relevant question concerns the capacity and conditions under which the particular services are performed. Earlier dealings known to both parties may form part of the factual matrix, but later activities cannot determine status in an earlier tax year.

5. The Autoclenz approach could not be used to disregard the BBC's written rights of first call and restriction. Under section 49 of the Income Tax (Earnings and Pensions) Act 2003, employee bears its common-law meaning. The protective statutory purpose which justified looking beyond contractual terms in Autoclenz and Uber was absent. In any event, an unexercised contractual right remains effective if it genuinely reflects what might realistically occur.

6. The respondent's notice failed. The matter was provisionally to be remitted to the Upper Tribunal for reconsideration on the First-tier Tribunal's findings, as corrected on the contractual-terms issue, subject to submissions about further evidence or fact-finding.

1. Court of Appeal: Allowed HMRC's appeal, set aside the Upper Tribunal's decision and directed that the employment-status assessment be remade.

2. Upper Tribunal (Tax and Chancery Chamber): In [2021] UKUT 37 (TCC), held that the First-tier Tribunal had wrongly disregarded written contractual terms, but dismissed HMRC's appeal after deciding on different grounds that the hypothetical contracts were not contracts of employment.

3. First-tier Tribunal: Allowed the company's appeals concerning the remaining two tax years. It held that the hypothetical contracts were contracts for services after disregarding provisions giving the BBC first call and control over certain outside engagements.