The Commissioners for HMRC v Basic Broadcasting Limited

The Court of Appeal in Atholl House CA held that the Third RMC Stage is a multi-factorial test. Its purpose is to assess whether, notwithstanding the existence of mutuality and control, the “provisions of the contract as a whole are consistent with its being a contract of service”: RMC at516-517. In its analysis of the Third RMC Stage, the FTT focussed entirely on whether Mr Chiles was in business on his own account and whether the hypothetical contracts could be seen as part of that business. This was the same error as the Upper Tribunal fell into in Atholl House UT.

For the purposes of the third stage assessment, the tribunal may take into account relevant factors other than the express and implied terms of the contract: Atholl House CA at [122]. The fact that the individual performs services for others as an independent contractor is relevant, “but it goes no further than that”: Atholl House CA at [128]. The focus of the tribunal must be on the particular engagement entered into and the terms of the hypothetical contract must remain “central to the enquiry”: Atholl House CA at [130].

Asking whether a person is generally in business on their own account cannot assist in determining whether a particular engagement would be an employment. It is not the nature of the activities which matters, but the capacity in which they are performed.

Having purported to apply the RMC test of employment status, the FTT erred in eliding the Third RMC Stage with a freestanding “business on own account” test. It applied that test as if it were by far the most important determinant at the third stage. In doing so, the FTT was following Atholl House UT, but thereby fell into the same error as that identified in Atholl House CA.

The FTT also erred in concluding that the extent of control by the BBC and ITV was not a compelling factor pointing toward employment.

The FTT failed, as directed by Atholl House CA, to place the hypothetical contracts at the centre of the enquiry. Instead, it focussed almost exclusively on Mr Chiles’ general ways of working and asked itself the wrong question of whether the hypothetical contracts were entered into as part of that business. In doing so, it took into account irrelevant matters and failed to take into account relevant matters.

HMRC were attempting to reargue the case and interfere with an evaluative decision of the FTT, and also attempting to conflate the considered approach taken by the FTT with the error of law identified in Atholl House CA.

The FTT correctly directed itself as to the applicable test at the Third RMC Stage, and conducted a careful and thorough analysis of all potentially relevant factors, including the terms of the hypothetical contracts and whether Mr Chiles would have been in business on his own account.

The Upper Tribunal should be very reluctant to interfere with an evaluative judgment of the FTT unless it is clear that the FTT misdirected itself as to the law, misapplied the law to the facts or reached an irrational conclusion on the facts found. None of those errors was committed by the FTT.

The Decision must be read in the round, avoiding over-analysis or undue focus on particular passages or turns of phrase.

In Atholl House CA, the Court of Appeal rejected HMRC’s argument that whether a person was in business on their own account could not be considered as part of the Third RMC Stage: indeed, it could be an important factor. The error of approach in AthollHouse UT which was identified by the Court of Appeal was therefore not simply applying the business on own account test, which the Court of Appeal accepted as an appropriate approach in some cases, but the Upper Tribunal’s comparative approach to that test, namely asking whether the activities performed by Ms Adams for the BBC were “of the same nature and kind” as those she carried on as an independent contractor.

HMRC’s argument that the FTT erred in its approach to the “business on own account” test fails to grapple with the different ways in which that phrase has been used in the case law. The FTT used the question of whether Mr Chiles would have been in business on his own account both to describe his activities separate from the hypothetical contracts and to express the Third RMC Stage. The FTT understood the difference between these uses, both of which are correct as a matter of law and consistent with Atholl House CA.

The FTT Decision did consider Atholl House UT and treat it with the respect due to a recent, binding decision in a similar area, but did not slavishly follow it and did not adopt the comparative approach used in Atholl House UT. The FTT was well aware of HMRC’s then forthcoming appeal against the decision in Atholl House UT.

HMRC’s argument as to the relevance of control at the Third RMC Stage is an impermissible argument as to the weight to be afforded to a factor.

HMRC’s argument that the FTT did not put the terms of the hypothetical contracts at the centre of its enquiry is an attempt to elevate comments of Sir David Richards to a principle of law. It also fails to reflect the context of Sir David Richards’ statement. In any event, while the terms of the hypothetical contracts are important, the weight to be given to different factors will vary and is a matter for the FTT: Atholl House CA at [86] and [124].

The irrelevant matters said by HMRC to have been considered by the FTT were all relevant. As to the terms of the hypothetical contracts which HMRC said the FTT failed to take into account or afforded insufficient weight, the FTT considered the matters specifically raised by HMRC and took into account all the terms of the hypothetical contracts. There was no need to refer again to each and every term.

In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.

…the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account? " If the answer to that question is " yes," then the contract is a contract for services. If the answer is " no," then the contract is a contract of service.

No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.

The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him.

In some cases, as for instance, with a jobbing gardener or a carpenter or a music teacher, who is found to be carrying on the activities in question for several customers or clients as part of his or her own business, the test may be very helpful indeed, but in many other cases the answer to the question whether the person concerned is carrying on business on his or her own account can only come as the corollary of the answer to the question whether he or she was employed under a contract of service.

It is important to have in mind that each case must depend on its facts, and the same question, as an aid to appreciating the facts, will not necessarily be crucial or fundamental in every case.

I will below review some of the authorities and the way they have developed. From this review, I have reached a number of conclusions relevant to this appeal. First, there is not a dichotomy between the RMC test on the one hand and the approach in Hall v Lorimer and the line of authorities of which it is part on the other. They do not represent significantly different tests for determining employment. Second, the question posed in Hall v Lorimer and other authorities as to whether a person is in business on their own account is, for the most part, simply another way of asking whether they are an independent contractor. If the evidence establishes that they do in fact conduct a business on their own account, quite apart from the engagement in dispute, that may be a relevant factor in the determination of the issue – a point to which I will return. But, as used in the authorities, that is not the situation to which this phrase is generally applied. See in this respect the observation of Dillon LJ in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 614, which I set out below when referring to that case. Third, the factors to which a court or tribunal can have regard when assessing whether a contract is a contract of employment or a contract for services are not confined only to the terms of the contract and the effects of those terms.

It is clear from these cases [RMC, the Privy Council decision in Lee Ting Sangv Chung Chi-Keung [1990] 2 AC 374 and Market Investigations Ltd vMinister for Social Security [1969] 2 QB 173] that there is no single satisfactory test governing the question whether a person is an employee or is self-employed. As Lord Griffiths observed in the last, most recent and authoritative case the question has never been better put than by Cooke J. in the MarketInvestigations case, at p. 184G. The question is: does the taxpayer perform his services as a person in business on his own account? If he does, his work as a vision mixer for the various television production companies must be regarded as performed under a series of contracts for services, entered into by him in the course of carrying on his own business. If he does not, his work must be regarded as performed under a series of contracts of employment with those companies.

In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.

…

The decided cases give clear guidance in identifying the detailed elements or aspects of a person's work which should be examined for this purpose. There is no complete exhaustive list of relevant elements. The list includes the express or implied rights and duties of the parties; the degree of control exercised over the person doing the work; whether the person doing the work provides his own equipment and the nature of the equipment involved in the work; whether the person doing the work hires any staff to help him; the degree of financial risk that he takes, for example, as a result of delays in the performance of the services agreed; the degree of responsibility for investment and management; how far the person providing the services has an opportunity to profit from sound management in the performance of his task. It may be relevant to consider the understanding or intentions of the parties; whether the person performing the services has set up a business-like organisation of his own; the degree of continuity in the relationship between the person performing the services and the person for whom he performs them; how many engagements he performs and whether they are performed mainly for one person or for a number of different people. It may also be relevant to ask whether the person performing the services is accessory to the business of the person to whom the services are provided or is “part and parcel” of the latter's organisation.

In this connection, Nolan LJ went on to say that the question whether an individual is in business on his own account, though often helpful, “may be of little assistance in the case of one carrying on a profession or vocation. A self-employed author working from home or an actor or a singer may earn his living without any of the normal trappings of a business.” Clearly, Nolan LJ was not suggesting that an author or actor was less likely to be self-employed than a person carrying on a commercial business on their own account, only that the indicia applicable to a commercial business (“the trappings of a business”) might well be inapplicable to a person carrying on a profession or vocation. Pointing out that the taxpayer in Hall v Lorimer customarily worked for twenty or more production companies and that the vast majority of his assignments lasted only a single day, Nolan LJ said “there is much to be said for the traditional contrast between a servant and an independent contractor. The extent to which the individual is dependent upon or independent of a particular paymaster for the financial exploitation of his talents may well be significant.” Again, Nolan LJ was bringing into account factors which went beyond the terms of each separate engagement.

The authorities show that there is no one test which is conclusive for determining into which category a particular contract falls. As Nolan LJ put it in Hall v Lorimer [1994] ICR 216, 226: “In cases of this sort there is no single path to a correct decision. An approach which suits the facts and arguments of one case may be unhelpful in another”.

In my judgment, this review of the authorities bears out the propositions which I earlier stated. It is wrong to treat RMC and the line of cases including Hall v Lorimer as representing two separate tests, with the possibility that the result in any particular case could depend on which test is applied. Both approaches recognise mutuality of obligation and the right of control as necessary pre-conditions to a finding that a contract is one of employment. Once those necessary, but not necessarily sufficient, conditions are satisfied, both approaches require the identification and overall assessment of all the relevant factors present in the particular case. In other words, they are both multi-factorial in their approach. A strict reading of the third condition in the RMC test might exclude consideration of any factor beyond the express and implied terms of the contract, and this is certainly the way that it has been interpreted in some of the authorities. There are, however, many other authorities in which a wider range of factors was taken into consideration and indeed, as recently as 2012, HMRC were successfully inviting the Upper Tribunal to do just that: Matthews v HMRC.

The more difficult question, in my view, is not whether other factors can be taken into consideration but what limit there is on the choice of such factors. For this, there must be a return to first principles. The relationship of employment is created by the employer and employee through the contract made by them. The question for the court or tribunal is whether, judged objectively, the parties intended when reaching their agreement to create a relationship of employment. That intention is to be judged by the contract and the circumstances in which it was made. To be relevant to that issue any circumstance must be one which is known, or could be reasonably be supposed to be known, to both parties. Those circumstances are the same as those comprising the factual matrix admissible for the interpretation of contracts: the “facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to the parties” (Arnold v Britton [2015] UKSC 36; [2015] AC 1619 at [21]).

If the person providing the services is known to carry on a business, profession or vocation on their own account as a self-employed person, it would in my judgment be myopic to ignore it, when considering whether or not the parties intended to create a relationship of employment. In many of the cases, it has been taken into account for that purpose. The weight to be attached to it is a matter for the decision-making court or tribunal. If the contract provides, as did Ms Adams’ contracts with the BBC, that she was a freelance contributor, the relevance of this fact arises directly from the contract’s express terms.

Whether or not an individual is in business on their own account can be used in two contexts; in determining the status of the contract in question and in describing the individual’s working practices outside that contract.

The relevance of the issue differs depending on which of these contexts applies.

As applied in determining the status of the contract in question, the formulation is one way of approaching the Third RMC Stage. It is not a different test to the Third RMC Stage, but simply one way of answering the question framed by MacKenna J.

In determining the status of the contract in question, asking whether or not the individual was acting in business on their own account under that contract may be a helpful way of answering the question, and may even be “very helpful indeed” (Nethermere). However, that approach “may be of little assistance in the case of one carrying on a profession or vocation” (Nolan LJ in the Court of Appeal in Hall v Lorimer). The extent to which the approach is a helpful way of answering the Third RMC Stage depends on all the facts.

The existence of a business on own account in the second context, namely the individual’s working practices outside the contract in question, is a relevant factor in considering the employment status of the contract in question. It is “an important contextual circumstance”, but is “no more than that”: Synaptek at [20].

While it would be “myopic to ignore” the existence of a business on own account outside the contract in question, the weight to be attached to that factor is a matter for the FTT: Atholl House CA at [124].

The Third RMC Stage is not approached correctly by asking whether the activities under the contract in question are different in some relevant respect from activities performed by the individual outside the contract: Atholl House CA.

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.

If the facts demonstrate that [Ms Adams’] professional life both in the tax years in dispute, and in previous tax years, involved her carrying on a business on her own account, and if the hypothetical contract with the BBC would be regarded as entered into in the course of that business, that would be perfectly capable of supporting a conclusion that the hypothetical contract was not one of employment.

We have found that the broadcasters do have a sufficient measure of control to establish a prima facie case that there is a contract of employment. However, we do not consider that the extent of the broadcasters’ control in either case is a compelling factor. Essentially, we must consider whether there are other provisions of the contracts or other factors which displace the prima facie case and require a conclusion that the contracts are contracts for services rather than contracts of employment.

In our view the most significant factor that might displace the prima facie case that Mr Chiles was an employee under the hypothetical contracts is whether he was in business on his own account. But only if the hypothetical contracts can properly be seen as part of that business. That is the approach taken by the Upper Tribunal in Atholl House and in other cases. It involves a value judgment and will depend on various factors which will carry different weight in the overall analysis.

Mr Tolley pointed out that BBL bears the burden of establishing that Mr Chiles should be treated as being in business on his own account. He submitted that there was a lack of documentary evidence which meant that we should not make any finding that Mr Chiles was in business on his own account. In particular, we could not assume that any other contracts entered into by BBL would themselves not subject to IR35.

We agree with Mr Tolley that we are not in a position based on the evidence and submissions before us to make any findings in relation to the status of the First ITV Contract so far as it relates to Daybreak or as to work done for the BBC on long-standing programmes such as Match of the Day 2 and The One Show. However we do consider that we have sufficient evidence from Mr Chiles to form a conclusion as to the nature of his other work, including work done for the BBC through independent production companies.

In relation to BBL’s other work, Mr Chiles’ evidence was not challenged. We infer on the basis of our findings of fact that Mr Chiles’ other work would not be considered that of an employee. We agree with Mr Rivett that Mr Chiles should be treated as being in business on his own account in all the tax years under consideration. The real question is whether the hypothetical contracts were entered into as part of that business, or whether they should properly be viewed as contracts of employment separate to the business.

We must now consider whether the hypothetical contracts are separate contracts of employment with ITV and BBC, or whether they should be seen as part of Mr Chiles’ business.

Mr Chiles clearly had time over and above his commitments under the ITV Contracts and the BBC Contracts to conduct his business. We have set out above the income he derived from his business in the relevant tax years and the nature of the work he was carrying out in those years. It is not uncommon for businesses to have a small number of good, long-standing clients who effectively form the backbone of a business, a factor which we have noted was recognised by the Upper Tribunal in [Atholl House UT] at [113] quoted above.

Mr Chiles had a number of clients in his existing business. It is notable that he was working for both ITV and BBC at the same time in the period November 2013 to May 2015. The services provided by Mr Chiles for ITV and BBC fell fairly and squarely within the scope of his existing business activities. In relation to ITV, Mr Chiles was also involved co-producing That Sunday Night Show on behalf of ITV, which we are satisfied was part of his existing business.

As we have said, Mr Chiles could profit from sound business management of his activities generally. He conducted his activities in a business-like manner. The Avalon Agreement applied to his income from the hypothetical contracts in the same way as it applied to his other work. Mr Chiles’ personal assistant helped him to better perform his duties under the hypothetical contracts as she did in relation to his other work.

We must stand back and look at the circumstances as a whole. Those circumstances include the prima facie existence of a contract of employment given the existence of mutuality of obligation and a sufficient framework of control. We take into account the nature and extent of the framework of control we have found to exist. We also take into account the nature and extent of the business which we have found Mr Chiles is to be treated as conducting on his own account. In all the circumstances we consider that Mr Chiles is to be treated as entering into the hypothetical contracts as part and parcel of that business. They were contracts for services and not contracts of employment. We conclude therefore that the condition in s 49(1)(c) ITEPA 2003 is not satisfied in relation to the ITV Contracts or the BBC Contracts in any of the relevant tax years.

…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.

…The responsibility of determining and evaluating all the relevant admissible evidence (both documentary and otherwise) is that of the tribunal in the first instance; an appellate tribunal is entitled to interfere with the decision of that tribunal, that a contract of employment does or does not exist, only if it is satisfied that in its opinion no reasonable tribunal, properly directing itself on the relevant question of law, could have reached the conclusion under appeal, within the principles of Edwards v Bairstow [1956] AC 14.

…both approaches require the identification and overall assessment of all the relevant factors present in the particular case. In other words, they are both multi-factorial in their approach.

… as Sir David says at [123], the answer to the question as to what limit there is on the factors to be taken into account is supplied by basic principles of contract law. In a case like the present, the issue is one of interpretation of a written contract (or, to be more precise, a hypothetical contract derived from a written contract with the alteration of the identity of one of the contracting parties). That contract, like any other agreement in writing, should not be construed in a vacuum, but in the light of the admissible factual matrix. It follows that a factual circumstance known to both parties at the date of the contract (such as, for example, the fact that the person providing the work has an established career as a freelance) should be taken into account. It also follows that a factual circumstance not known or reasonably available to one party (such as, for example, the precise terms on which the person doing the work has performed work for other parties if those terms have not been disclosed to the alleged employer) cannot be taken into account.

The knowledge issue was not part of the ratio of Atholl House CA, and so is not binding, or, alternatively, the Court of Appeal is wrong on this issue because it is inconsistent with previous authorities.

BBL had first appealed to the FTT 6 years ago and the first contract relevant in the appeal was negotiated 14 years ago. Making new findings of fact now in relation to the knowledge issue would be very difficult because of the effluxion of time and would impose an unfair additional burden on Mr Chiles and witnesses on his behalf.

The procedural history of the appeal compounded the unfairness which would arise from permitting a new argument to be run by HMRC at this very late stage. In particular, the FTT had refused permission for BBL to run a new argument at the FTT hearing and had also refused its application for disclosure from HMRC, which included material relating to Atholl House.

The approach to new arguments raised late in the appeal process is considered in HMRC v Ritchie [2019] UKUT 71 (TCC) (“Ritchie”). This established that the guiding principle in determining whether to admit a new argument was “fairness in the circumstances of the case” and also that where a new argument gave rise to the possibility that it might be rebutted by further evidence, the other party must have a fair opportunity to bring that evidence to the tribunal. As in Ritchie, in this appeal it would be too late and would be unfair for the knowledge point to be admitted now.

At all stages up to HMRC’s application to the FTT for permission to appeal, both parties had proceeded on the basis that the FTT could and should take account of facts outside the terms of the hypothetical contracts. BBL had no reason to think that HMRC might take the position that only facts found to be within the actual or constructive knowledge of the BBC and/or ITV could be taken into account.

Once HMRC had raised the knowledge issue, BBL invited HMRC to agree various facts relevant to the knowledge issue, and HMRC had refused to engage because the facts sought to be agreed had not been the subject of cross-examination.

HMRC say that they do not need permission to raise the knowledge issue because the burden of proof in the appeal is on BBL. However, the burden of proof on BBL to displace an assessment does not mean that a taxpayer must prove aspects of its case which are common ground and not challenged by HMRC.

HMRC have not identified the facts relevant to a finding that Mr Chiles was in business on his own account which remain to be found, taking into account the knowledge issue.

The need for new evidence and a new hearing would offend against the principle of finality in litigation and be grossly unfair to Mr Chiles.

The FTT made all the necessary findings of fact including as to the knowledge issue or had available sufficient evidence to do so.

Even if the FTT did err in this respect, it was not material to its decision.

The Court of Appeal has confirmed that before any matter may be regarded as a relevant factor at the Third RMC Stage, it must be known or reasonably available to both contracting parties. However, BBL advanced no case, and consequently the FTT made no finding, as to whether a circumstance (such as the capacity in which Mr Chiles undertook other work) was known or reasonably available to the BBC and/or ITV when the contracts were made.

BBL’s assertion that the FTT did not thereby err in law because the knowledge issue did not form part of HMRC’s pleaded case before the FTT is misconceived. The burden of proof in the appeal was on BBL to prove the knowledge issue. They did not do so, and so HMRC was not obliged to deal with an argument that was never raised by BBL.

HMRC is not taking a new point and so does not need permission to make the argument in this appeal.

The position in this case was not the same as in Ritchie.

…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.

The FTT shall reconsider and remake its decision in relation to the Third RMC Stage and in relation to its disposition of the appeal, taking into account and applying the guidance given in Atholl House CA, both in relation to the correct approach to the Third RMC Stage and in relation to the knowledge issue, and taking into account the terms of this decision.

The decision shall be so remade on the basis of the FTT’s findings in the Decision in relation to the mutuality of obligation and control stages of RMC, and on the basis of the findings of fact in the Decision and any further findings of fact that the FTT considers appropriate to make.

It shall be for the FTT to determine whether to make any further findings of fact and whether to allow further evidence to be admitted.