Kickabout Production Limited v The Commissioners for HMRC

IR35 requires a three-stage inquiry: identify the actual arrangements, construct the hypothetical direct contract, and decide whether it would be a contract of employment.

A client’s obligation to provide work may arise from the contract as a whole, even without an express promise. Fixed-term engagement, personal availability, exclusivity and related termination provisions may require the client to offer a minimum amount of work.

Employment status remains a holistic assessment. Mutuality and control do not create a presumption of employment. The contractual right of control matters, but its extent and quality may also be relevant at the final stage. The relevance and weight of individual factors depend on the circumstances.

HMRC determined that IR35 applied to arrangements under which Paul Hawksbee’s services were supplied to Talksport through Kickabout Productions Limited. KPL was assessed for PAYE and National Insurance contributions for four tax years.

The First-tier Tribunal allowed KPL’s appeal. The Upper Tribunal allowed HMRC’s appeal, set aside the FTT’s decision and remade it, holding that the hypothetical contracts were contracts of employment. KPL appealed on contractual construction, the Upper Tribunal’s power to remake the decision, control and the multi-factorial assessment of employment status.

The central issues were whether Talksport was obliged to provide work and whether the hypothetical arrangements amounted to employment.

The appeal was dismissed. The Court of Appeal upheld the Upper Tribunal’s decision that IR35 applied.

1. Under section 49 of the Income Tax (Earnings and Pensions) Act 2003, the inquiry involved identifying the actual arrangements, ascertaining the hypothetical direct contract between worker and client, and deciding whether that contract was one of employment. The terms of both contracts, read as a whole, obliged Talksport to offer at least 222 programmes per year. That conclusion followed from the fixed-term engagement, the requirement for personal availability, the substantial restrictions on other work, the payment structure and the suspension and termination provisions. Payment by reference to programmes actually presented did not negate the obligation. If construction had not produced that result, a corresponding term would have been implied in the piecework contracts for business efficacy.
2. Section 12 of the Tribunals, Courts and Enforcement Act 2007 gave the Upper Tribunal discretion, after finding an error of law, to set aside the FTT’s decision and either remit or remake it. The Upper Tribunal was not subject to the stricter approach applicable to a second appellate court in [2018] EWCA Civ 791. It was entitled to remake the decision using the FTT’s unchallenged primary findings. Proportionality, including avoiding delay and unnecessary cost, was a relevant consideration.
3. Control required consideration of the right to decide what was done, how and by what means, and when and where it was done. The right need not be unrestricted. Talksport controlled where and when the services were performed and retained ultimate control over programme content. Limited practical control over how a highly skilled presenter performed the work did not prevent a sufficient framework of control.
4. The final stage required an overall assessment of all relevant factors. Mutuality and control did not create a prima facie presumption of employment. The extent and quality of control could be relevant at that stage. The weight of factors, including whether a person was part and parcel of the organisation, depended on the circumstances. Contractual statements denying employment were broadly neutral, and the approach in Uber concerned a different statutory context. The absence of holiday, sick pay and similar rights carried little weight where the hypothetical contracts expressly described the engagement as freelance.

Lord Justice Arnold added an obiter observation that the written terms of Contract One identified Mr Hawksbee, rather than KPL, as the contracting party. Lord Justice Peter Jackson agreed with Sir David Richards’ reasons.

• Court of Appeal (Civil Division) [2022] EWCA Civ 502 : dismissed KPL’s appeal.
• Upper Tribunal (Tax and Chancery Chamber) [2020] UKUT 0216 (TCC): allowed HMRC’s appeal, set aside the First-tier Tribunal’s decision and remade it in HMRC’s favour.
• First-tier Tribunal: allowed KPL’s appeal against HMRC’s PAYE and National Insurance determinations. Citation not stated in the judgment.