IR35: Gary Lineker Wins Case Against HMRC Over £4.9m Tax Bill

By Graham | April 2, 2023

Fresh from his win against the BBC over his tweeting activity, Linker makes it a double (for now) with a win against HMRC.

HMRC has suffered another setback in its enforcement of IR35 rules with the recent defeat in the case against Gary Lineker. The former footballer and sports broadcaster was accused of underpaying tax between 2013 and 2018, with HMRC claiming he should have been classed as an employee of the BBC and BT Sport rather than a contractor. However, the First Tier Tribunal (FTT) ruled in favour of Lineker, rejecting HMRC’s £4.9 million IR35 claim.

IR35 legislation aims to prevent tax avoidance by “disguised employees” who charge for their services off-payroll. Lineker set up Gary Lineker Media (GLM), a partnership with his then-wife Ms Bux, in 2012. The partnership was established to channel his earnings from the BBC and BT Sport and provide Ms Bux with a £30,000 “fixed profit share” for accompanying her husband to promotional and marketing events. Lineker argued that all income taxes and National Insurance Contributions (NICs) were paid on the income through the GLM partnership.

The case ultimately hinged on the issue of ‘direct contracts.’ Judge John Brooks found that the IR35 legislation did not apply in Lineker’s case because he had direct contracts with both the BBC and BT Sport through the GLM partnership. Since no intermediary was involved, IR35 could not apply as a matter of law. The judge also noted that Lineker had paid all his taxes, accounting for income tax and Class 4 NICs on the entirety of the income from his services, less a fixed amount of £30,000 paid to Ms Bux, who also paid tax on this sum.

This IR35 case was unique because Lineker operated via a general partnership rather than a limited company and had direct contracts with the BBC and BT Sport. In previous IR35 cases, the intermediary has typically been a limited company, and the issue of direct contracts between the client and worker has not arisen. For IR35 to apply, a third party must be involved, preventing the worker from entering into contracts directly with their hirer. A partnership can avoid IR35 if the worker providing the services signs the contract, acting as the principal and making it a direct contract between the hirer and worker.

However, care should be taken when considering the type of partnership. A Limited Liability Partnership with a separate legal personality could be deemed an ‘intermediary.’ In Lineker’s case, the general partnership structure, which lacks a distinct legal personality, meant that IR35 did not apply.

HMRC is considering an appeal of the Gary Lineker case. A spokesperson for HMRC said: “We do not agree with the decision that the rules cannot apply in this case, and we’re considering an appeal. It is our duty to ensure everyone pays the right tax under the law, regardless of wealth or status.”

The Gary Lineker case demonstrates the complexity surrounding IR35 legislation and the importance of carefully evaluating contractual arrangements and potential tax liabilities. If you require assistance determining whether IR35 rules apply to you or need advice on structuring your affairs tax-efficiently, please get in touch with us at hello@mercianaccountants.co.uk or visit our contact page.