UT/2023/000018 - [2024] UKUT 00165 (TCC)

It is… necessary to consider whether the activities that Ms Adams performed for the BBC under the hypothetical contract were of the same nature and kind as those that she carried on as an independent contractor. It is also necessary, when doing so, to consider whether there is some relevant difference between the activities undertaken for the BBC and those performed as an independent contractor.

We therefore do not consider that there was any relevant difference between the characterisation of Ms Adams’s activities under the hypothetical contracts in the 2015/16 and 2016/17 tax years and the characterisation of either (i) her activities under hypothetical contracts with the BBC in 2013/14 and 2014/15 or (ii) her other activities as a self-employed journalist and broadcaster in other tax years. Therefore, we consider that the prima facie conclusion reached at the end of Stage 2 is to be displaced because, when entering into the hypothetical contracts here at issue, Ms Adams would have been entering into business on her own account.

Having accepted the FTT’s findings that Ms Adams had tended over her professional career generally to carry on her profession as an independent contractor and that her activities as an independent contractor included activities similar to those she performed for the BBC, the test which the UT set itself at [112]-[116] was whether there was “some relevant difference between the activities undertaken for the BBC and those performed as an independent contractor”. Unless there was some such difference, Ms Adams would be performing her services under the hypothetical contract with the BBC as an independent contractor.

In my judgment, this approach is with respect to the UT flawed in a number of important respects.

First, as the UT recognised in the first sentence of [112], Fall v Hitchen had made clear that an individual can in the same tax year perform similar services both as an employee and as an independent contractor. It is not the activities that matter but the capacity in which, and the conditions under which, they are performed. For that purpose, it is a relevant fact, if known or reasonably available to the putative employer, that the individual performs similar services as an independent contractor, but it goes no further than that.

Second, insofar as this approach is concerned with the terms and circumstances under which Ms Adams performed her services, it is not the terms and circumstances of her other engagements which are in issue, but the terms and circumstances of her hypothetical contracts with the BBC. The terms and circumstances of her other engagements may well themselves have been varied and it cannot be assumed that, if analysed, all or indeed any of them would be found to be engagements as an independent contractor. They cannot be held up as a gold standard against which the contracts with the BBC were to be judged. Even if the FTT had received evidence of these other engagements and the circumstances in which they were made, the approach of the UT is misguided.

Third, save as regards the amount of time that Ms Adams’ contractual commitment to present at least 160 shows a year took up (“a good proportion of her available working time”), there is no consideration at all by the UT of the terms of the hypothetical contracts. While I have rejected the notion that it is only those terms that may be considered, the terms of the contracts remain central to the enquiry. The UT failed to have regard to any other terms, including those that pointed in the direction of employment.

Fourth, when considering the time commitment for Ms Adams, the UT said that it needed “to be judged by reference to an appropriately broad sample of Ms Adams’s professional career rather than simply by reference to a snapshot in the two years in dispute” and that any economic dependence on the BBC in those years “has to be understood in the context of Ms Adams’s profession as conducted in surrounding tax years”. I accept, of course, that the tribunal should not shut its eyes to the fact that Ms Adams had been performing as an independent contractor, if known or reasonably available to the BBC, for a period before the start of the years in dispute but again it goes no further than that. The critical periods remain the years in dispute, during which she may have become employed by the BBC for some of her working time, an issue which depends on an assessment of the hypothetical contracts in the circumstances in which they were made. If the UT’s reference to “surrounding tax years” was intended to include years after the years in question, that must be wrong. Ms Adams’ activities in later years cannot be used to assess whether she was employed in earlier years.

The findings that the hypothetical contracts would satisfy the irreducible minimum of mutuality of obligation and the right of control remain. What is now required is an assessment of whether overall there would under the hypothetical contracts have existed an employment relationship between Ms Adams and the BBC. For this purpose, there need to be taken into account the terms of the hypothetical contracts and their effects, and the circumstances in which such contracts would have been made insofar as they would have been known to both parties or were reasonably available to both parties.

This is an assessment which has yet to be made in this case on a correct basis. The FTT wrongly proceeded on a basis that left clauses 8.1 and 8.2 out of account. As explained above, the UT largely failed to take account of the many features of the contractual terms and their effects, some of which may be seen as pointing to an employment relationship while others may be seen as consistent with Ms Adams being an independent contractor. It largely focused on Ms Adams’ freelance career and engagements without considering their relevance to her hypothetical contract with the BBC in the two years in question or the extent to which such information was known or reasonably available to the BBC.

This court has previously made clear that its own power to re-make a decision should be used sparingly and only if the court feels no real doubt about how the FTT or the UT, properly directed, would have decided the case: see Newey (t/a Ocean Finance) v HMRC [2018] EWCA Civ 791; [2018] STC 1054 at [111]-[112]. Like Henderson LJ in that case, I do not feel confident enough about the correct conclusion for this court to make the decision.

It is therefore, unfortunately, necessary for the case to be remitted. My provisional view is that the case should be remitted to the UT for the decision to be remade on the basis of the FTT’s findings of fact, as corrected by the UT’s decision on the Autoclenz point. I would, however, give the parties the opportunity to argue, if either wishes to do so, that further facts should be found and, if so, whether the parties should be confined to the existing evidence or (and, if so, on what basis) either party should be permitted to adduce further evidence. If any further fact-finding or evidence were permitted, it would then be necessary to decide whether the case should be remitted to the UT or the FTT.