The Commissioners for Her Majesty’s Revenue & Customs v Atholl House Productions Limited [2022] EWCA Civ 501
The Court of Appeal has handed down judgment in The Commissioners for Her Majesty’s Revenue & Customs v Atholl House Productions Limited [2022] EWCA Civ 501, contradicting HMRC’s interpretation of the law and remitting the case back to the Upper Tier Tribunal for a fresh determination of the facts. The facts of the case leading to this judgment are widely known so not repeated ad nauseam. This judgment was handed down along with Kickabout Productions Limited v The Commissioners for Her Majesty’s Revenue & Customs [2022] EWCA Civ 502 which resulted in defeat for the contractor.
While not a defeat for HMRC, the Court of Appeal has provided welcome certainty for contractors. The judgment upheld long-standing authorities such as Hall v Lorimer [1994] ICR 216 so that contractors who are legitimately in business on their own account for the purposes of the engagement under review can operate outside of the IR35 legislation, notwithstanding other factors such as personal service and elements of control that fall short of an employment relationship. The Court of Appeal rejected submissions by counsel for HMRC to distinguish between the traditional test of employment status in Ready Mixed Concrete Ltd v Minister of Pensions [1968] 2 QB 497 and the “in business on own account” test in Hall v Lorimer [1994] ICR 216. Per Arnold LJ [170]; that “contract, like any other agreement in writing, should not be construed in a vacuum, but in the light of the admissible factual matrix.”
Arnold LJ’s dicta [168-171] is generally consistent with the IR35 legislation, i.e., the test is conjunctive, and the tribunal will consider the circumstances of the engagement on a case by case basis. As always, individual factors such as substitution are of limited value if the client in a typical IR35 context requires an individual to undertake a role for a fixed period.
However, the significance of Atholl House Productions Limited is that the Court of Appeal has provided a degree of clarification on the necessity of weighing the factors carefully, such as whether the engagement in question is consistent with the contractor running a business (incurring costs, risks, etc.) or another period of employment. Accordingly, the narrow interpretation advocated by HMRC has been rejected. The Court of Appeal reaffirmed the requirement to consider the broader view of employment status, considering the contractor’s other engagements as known to the parties at the contract’s inception.
As this case is binding on the tribunals, HMRC must finally update the much-maligned Employment Status Manual, which many falsely believe to have doctrinal authority.
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