Former England footballer and Match of the Day presenter Gary Lineker has won a significant victory in his long-running battle with HM Revenue and Customs (HMRC) over a £4.9m tax bill. The dispute arose after HMRC claimed that Lineker had incorrectly classified himself as a self-employed freelancer, rather than an employee of the BBC and his other clients.
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Income Tax – Preliminary Issues
The case centred on the UK’s income tax legislation and specifically the intermediaries legislation, commonly known as IR35. This legislation is designed to ensure that individuals who work through their own limited company or other intermediary, such as a partnership, are not able to avoid paying income tax and national insurance contributions by falsely claiming to be self-employed.
Intermediaries Legislation (IR35)
HMRC argued that IR35 applied to Lineker’s work for the BBC and other clients, and that he should therefore have paid income tax and national insurance contributions as if he were an employee. Lineker maintained that he was legitimately self-employed and that the IR35 legislation did not apply to his situation.
Whether Applicable Where an Individual’s Services are Supplied through a General Partnership
A key issue in the case was whether the IR35 legislation applied where an individual’s services were supplied through a general partnership, as was the case with Lineker’s work for the BBC. HMRC argued that it did, but Lineker disputed this.
Whether, on the Facts, There was a General Partnership
The tribunal had to consider whether, on the facts, there was a general partnership in place. HMRC argued that there was, based on the terms of Lineker’s contracts and the way in which he provided his services. Lineker denied that there was a partnership and argued that he was simply providing his services as a self-employed individual.
Whether Direct Contract with Individual
The tribunal also had to consider whether Lineker had a direct contract with the BBC and his other clients, or whether his services were provided through an intermediary. HMRC argued that Lineker’s contracts were with his personal service company, which was an intermediary for the purposes of the IR35 legislation. Lineker maintained that he had a direct contract with each of his clients.
Section 49(1)(b) Income Tax (Earnings and Pensions) Act 2003 Considered
The tribunal ultimately concluded that Lineker was not an employee of the BBC or any of his other clients, and that the IR35 legislation did not apply to his work. In reaching this decision, the tribunal considered a number of factors, including the terms of Lineker’s contracts, the way in which he provided his services, and the level of control exercised by his clients over his work. The tribunal also considered section 49(1)(b) of the Income Tax (Earnings and Pensions) Act 2003, which sets out the conditions that must be met for the IR35 legislation to apply.
Appeal Allowed
The outcome of the case will be welcomed by other freelance workers and self-employed individuals who have been affected by the IR35 legislation. Lineker expressed his relief and satisfaction on Twitter, stating that he had always believed that he was “self-employed and not an employee”. The ruling also highlights the importance of carefully considering the terms of contracts and the way in which services are provided, to ensure that the correct employment status is established.
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