Gary Lineker has successfully won his battle with HMRC over a £4.9 tax bill. But what, in anything, does the ruling mean for contractors, when – in the end – IR35 wasn’t even at the core of the case?
What happened in the Lineker vs. HMRC case?
HMRC claimed that Lineker, who works for both the BBC and BT Sport, should be classed as an ’employee’, with all of his earnings subject to PAYE. The taxman said he owed £3.6m in income tax and £1.3m in NICs.
All of Lineker’s earnings were paid to a partnership – GLM – which had been set up in 2021 with his ex-wife. This was the first time a case has considered IR35 in relation to a general partnership.
On Tuesday 28th, following his appeal to the First-Tier Tribunal, Judge Brooks concluded that Lineker had direct contracts with each organisation, and as a result, “the intermediaries legislation (IR35) does not, and cannot as a matter of law, apply.”
Interestingly, the case rested on the nature of the business relationships he had with his clients, rather than the type of business structure he worked under.
As there was no ‘intermediary’ involved, by virtue of Lineker’s direct business relationships, IR35 couldn’t be a consideration.
You can read the FTT decision in full here.
What does the case mean for IR35 and contractors – in general?
We asked Seb Maley, CEO of tax specialists Qdos, some questions about the case.
Did this case provide anything useful for IR35 watchers?
“Other than showing HMRC’s appetite for IR35 investigations, there’s not a massive amount to take from the Lineker case for typical contractors. Although, it’s an important reminder to contractors that they too can be investigated by HMRC for contracts completed prior to the introduction of the off-payroll rules.”
Was it the first case which dealt with direct contracts and partnerships?
“It’s certainly the first I’m aware of which has gone to tribunal, yes.”
Although in the end, it wasn’t relevant in this case, can a general partnership be an ‘intermediary’ for IR35 purposes, even though it’s not legally a separate legal entity from its members?
“While it’s uncommon, partnerships can be an intermediary for IR35 purposes. For example, if the worker owns 60% or more of the profits, the majority of the partnership’s profits come from a single client or the income of a partner is based on the income generated by another partner.”
Can Lineker reclaim his significant costs for this case? (mention how important tax investigation insurance cover is).
“This six-year-long case is likely to have cost Gary Lineker a fortune. The injustice is that he’s innocent and HMRC got it wrong. Worse yet, it’s only in very rare cases that costs can be reclaimed in First Tier Tribunals. Above all else, a case of this significance – and carrying such vast tax liability – highlights the importance of holding IR35 insurance.”