Michael Lynagh, the Sports Commentator and former professional rugby player, through his company MPTL, has been embroiled in a dispute with the HMRC since 2020. This dispute arose a tax bill over breach of IR35 rules. Sports commentators are expected to submit their monthly earnings with their tax returns as self-employed individuals.
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Background
Michael Lynagh’s has recently had his appeal against the HMRC rejected. Interestingly, a tribunal hearing on 7th December 2022 ended with the Judge ruling that Michael Lynagh had lost entitlement to appeal the HMRC tax bill served on his company MPTL to the tune of £230,000 as the tax accountants had failed to file an appeal before the prescribed deadline. According to the tribunal judge, there was an ‘absence of any good reason’ to justify the delay.
MPTL argued that the delay was caused by their enquiry officer being on sick-leave which failed to satisfy the tribunal. In recent times there has been a slew of high profile IR35 tax cases. Both Alan parry and Dave Clark lost their appeals against the HMRC leaving them with hefty tax bills to pay.
What is the meaning of IR35?
To put it simply, IR35 is another name for the off-payroll working rules. This term ‘IR35’ refers to the initial press release that announced the legislation for the first time in the year 1999. These rules were designed to work out whether a contractor is someone who’s genuinely self-employed rather than a ‘disguised’ employee, for the purposes of paying tax. When an individual providing services as a contractor is a ‘disguised’ employee, the individual is essentially seeking to take advantage of the tax efficiency of working through a limited company or partnership, as the case may be, but otherwise they should be classed as an employee.
Who these rules apply to?
The IR35 Rules are applicable if an individual provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly. These rules apply to contracts regardless of whether the agreement was made in writing, orally or implied agreement between the parties. The rules apply on a contract to contract basis so they may apply to some contracts while excluding the others based on the above distinction.
These off-payroll working rules (IR35) may apply to you if you are providing your services through your own limited company or another type of intermediary to your client. An intermediary will usually be the worker’s own personal service company, but could also be any of the following:
- a partnership
- a personal service company
- an individual
What is the Test for Employment Status?
When considering whether or not these rules apply to you and your contractual arrangement, the first step is to work out your employment status as the service provider. If the service provider would be classified as an employee save for their intermediary (often called ‘personal service company) these rules will apply and you could be faced with significantly large tax bill. The factors taken into account are supervision, direction and control. However, in reality, IR35 status is wholly dependent upon the IR35 case law and employment legislation, which is itself largely reliant on decades of employment tests heard by the UK courts.
If you want specialist legal advice from a HMRC Tax Disputes Lawyer in London, we invite you to contact us so we can assess your claim. We can subsequently provide urgent help, advice or representation to clients from our expert legal team of leading Tax Dispute solicitors and barristers. Just call or email us now for an initial consultation; our legal team are waiting to help.
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