Gary Lineker has challenged HMRC over a £4.9m IR35 tax bill, bringing his tax affairs into the public eye in the process.
Intermediaries legislation, or IR35 as it is commonly known, was first introduced in 2000 in an effort to crack down on “disguised employment”, which often took the form of freelancers supplying their services to clients through an intermediary, such as a limited company.
There are a few main issues to be considered in establishing whether someone is caught by the legislation: whether there is a requirement of personal service; the degree of control exercised over the contractor’s work by the client; and mutuality of obligations between the parties. Once the main factors have been considered, the courts look at any ‘in-business’ factors, which can help to show the financial risks of being in business. Each case is determined on its facts, the contracts, and recently, the application of HMRC’s yardstick.
Recent years have seen a spike in the number of IR35 investigations into radio and television broadcasters by HMRC, while other professions have seen a much quieter period. Several high profile presenters have been in dispute with HMRC, including Eamon Holmes, Christa Ackroyd, and Paul Hawksbee, who all lost their cases. However, HMRC have not been entirely successful: the First Tier Tribunal found in favour of Kaye Adams and then went on to dismiss HMRC’s appeal against its decision. ITV presenter was also successful in appealing against a £1.2million tax bill, and in this case, HMRC did not appeal.
HMRC are currently pursuing a case against the broadcaster Gary Lineker, with suggestions of a potential bill in the region of £4.9million in income tax and national insurance contributions (NICs) under IR35. Lineker, who hosts the BBC’s Match of the Day and was until recently the BBC’s highest-earning star on £1.75m per year, has been embroiled in an IR35 tax case with HMRC since 2019, concerning whether taxes are owed relating to his work as a presenter during the mid 2010s. Lineker invoiced broadcasters through a partnership called Gary Lineker Media, which was run with his ex-wife. He has maintained that intermediaries legislation does not apply to him because he is an independent contractor and therefore cannot be regarded as an employee of the BBC or BT Sport. The case was due to be heard at the First Tier Tribunal, but recently Lineker decided to add a new ground to his appeal against the assessment of NICs.
Normal practice is that HMRC will usually send notices demanding payment of Class 1 NICs in respect of a particular tax year on the basis that they believe the taxpayer is caught by the intermediaries legislation. On this occasion, HMRC sent the notices for the years 2013 and 2014, but instead of stating that they believed IR35 to apply, an HMRC officer stated that they did not have “sufficient facts upon which he could issue an opinion” as to whether Lineker was liable to pay any particular class of NIC.
Lineker is arguing that this wording makes the notice void, because the relevant legislation - section 8(1)(c) of the Social Security Contributions (Transfer of Functions) Act 1999 requires an HMRC officer to decide whether a person is or was liable to pay NICs of a particular class before issuing an assessment. In that respect, the legislation differs from that which governs tax demands – Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 – which allows HMRC to make an assessment “if it appears… that there may be tax payable for a tax year… which has not been paid to HMRC”.
Lineker’s contention is that before HMRC can issue a formal notice assessing liability for NICS, a greater degree of certainty that it has decided IR35 applies in the case is required. HMRC obviously opposed the addition of this ground of appeal to the case, but the First Tier Tax Tribunal judge Brooks J disagreed and allowed it, stating: “Given that this ground raises a succinct and discrete legal issue and these proceedings are at an early stage, I consider that [Lineker] should be permitted to add [it] to the grounds of appeal”. HMRC will be allowed to respond to this new ground by amending their statement of case.
This case is one of utmost importance for broadcasters for various reasons. Given the nature of the industry they are in, there is always a danger for broadcasters’ tax affairs to end up in the public domain because of their celebrity status, and the prospect of bad publicity will often lead them to settle with HMRC. By voluntarily bringing his tax affairs into the public domain, Lineker has highlighted the importance of the questions that need to be answered and the due process of law which should be followed by all parties. The case will go some way in ensuring that HMRC follow statutory procedures rather than making assumptions, and will also give us some insight into how the courts view HMRC’s handling of enquiries.
Click here to learn more about IR35 and how to determine your IR35 status.