‘Directly engaged’ Gary Lineker gets £4.9m IR35 tax bill by HMRC thrown out

Gary Lineker has beaten HMRC in an IR35 tax fixture that has turned out not to be about IR35.

In line with the March defence from the Match of the Day presenter’s legal team that “IR35 has nothing to do with it,” a tribunal found IR35 could not apply “as a matter of law.”

Crucially, Lineker, rather than his partnership Gary Lineker Media, had a direct contract with the BBC and BT Sport, so with no intermediary, the Intermediaries legislation (IR35) is not in play.

This determination by the FTT that “the intermediaries legislation cannot apply” quashes HMRC’s £4.9million demand for presenting work Lineker did for the duo from 2013 to 2018.

Or at least, the determination at (92) of the FTT’s ruling quashes the bill “for now,” cautioned IR35 expert Chris Mattingly, moments before HMRC said it is indeed considering an appeal.

'HMRC considering an appeal'

An HMRC spokesperson yesterday afternoon told ContractorUK: “The tribunal has confirmed the off-payroll rules apply to partnerships, as we have always said. 

“However, we do not agree with its decision that the rules cannot apply in this case and we’re considering an appeal.”

The HMRC spokesperson then took aim at Lineker’s celebrity status, saying: “It is our duty to ensure everyone pays the right tax under the law, regardless of wealth or status.”

'Revenue failing to understand the very rules it designed'

But it is not just HMRC which is on the attack in wake of the tax win for the former professional footballer.

IR35 contract review firm Qdos says HMRC “couldn’t tell from the outset” if its own IR35 rules “should have been a consideration.”

“The case illustrates everything wrong with HMRC’s approach to IR35 compliance,” blasted the firm’s CEO Seb Maley.

“Other than having a habit of failing to understand the very rules it designed, HMRC pursues innocent individuals for years. This takes a huge toll, not just financially but emotionally”.

'Chasing the little guys'

A Twitter user confirmed the financial fallout, writing last night: “My daughter went freelance and worked within the IR35 rules.

“She ended up having to pay HMRC £7,000. Difference between her and Gary [Lineker]?

“She couldn't afford expensive legal representation…[that’s why HMRC have] been chasing the little guys for years. Easy targets!”

'Deemed employer'

But it might now be the BBC which is pursued, according to tax lawyer Rebecca Seeley Harris.

“It will be interesting to see what HMRC does now, whether they will pursue the BBC as the deemed employer or not,” the founder of ReLegal Consulting told ContractorUK.

Shown First-Tier Tribunal judge John Brooks’ judgment, Seeley Harris said it was “great news” for Lineker, but a “poor reflection on HMRC’s understanding of its own legislation.”

'First time ever FTT has considered direct contract or not'

Yet some may be more sympathetic to HMRC, on the basis that Lineker’s appeal represents “the first time that the issue of whether there was a direct contract” has ended up in court.

“This is because in all previous cases in which the intermediaries legislation has been considered the intermediary concerned, with which the contract was made for the services of the worker to the client, has been a limited company,” continued judge Brooks.

WTT Group, where Mr Mattingly is senior compliance specialist agrees.

'Ground-breaking'

He told ContractorUK: “We are breaking new ground with this judgment, finding that this is the first time a tribunal has dealt with the issue of whether or not there was a direct contract between the client and the worker.

“The judge in this instance finding that by virtue of Gary Lineker signing each of the contracts in question, he was in fact signing as the principal, thus making it a direct contract, rather than an arrangement involving a third party, the partnership trading as Gary Lineker Media.

“By establishing there is no third party, the intermediaries legislation -- IR35 -- does not, and cannot as a matter of law, apply.”

'General Partnership, not LLP, saved Lineker'

Put another way, for IR35 to be in play, there needs to be a third party involved which leads to the ‘worker’ not entering into contracts with their hirer directly, says Carolyn Walsh, a former tax inspector, who today writes about Lineker’s win exclusively on ContractorUK.

A partnership can therefore avoid IR35 as long as the worker providing the services signs the contract, thereby acting as the principal and making it a contract directly between client and worker, adds Mr Mattingly.

But care needs to be taken as to what type of partnership, indicates Tom Wallace, also of WTT Group.

“It was actually the fact that it was a General Partnership (GP) and not an Limited Liability Partnership that saved [Mr Lineker],” posted Wallace, WTT’s director of tax investigations.

“An LLP having its own legal personality would have meant that it was the ‘intermediary.’ It was only Mr Lineker signing as principle of a GP which meant that IR35 couldn't bite, as it was a direct contract, [given that] a GP has no distinct legal personality.”

'IR35 could have come into the equation if Danielle Bux had signed'

“Just when we thought IR35 couldn’t get any more complex,” reflected Qdos’s Mr Maley.

“The decision hinged on Lineker signing the contract himself, as both the worker and a principal of his partnership. If his partner, Danielle Bux, had signed, IR35 could have come into the equation.”

Indeed IR35 remains ‘in the equation’ for partnerships, cautioned ReLegal Consulting, sounding worried contractors might get the wrong end of the stick and think supplying a client through a partnership is a silver bullet.

'Direct engagement'

“It was a direct engagement [what won it],” emphasised ReLegal’s Seeley Harris, the author of CEST Explained.

“Despite Gary Lineker Media being a partnership, the contracts with the BBC and BT were direct. So, as a matter of law, IR35 could not apply.”

As to how HMRC might use an appeal to argue IR35 did catch Linker’s assignments, like Match of the Day which he began in 1999, WTT’s Mr Mattingly already has an idea.

'Pleased'

“Given there is no dispute that the partnership existed, I am guessing HMRC will seek to establish that Gary Lineker intended to enter the contract not as the principal, but as an agent, to bind the firm and its partners.”

In a statement to ContractorUK, he continued: “This will likely be demonstrated by the fact that his former wife, Danielle Bux, together with him signed the 2013 BBC Contract and 2015 BBC Contract. If successful, this will re-establish the presence of an intermediary and deny the grounds that have allowed this appeal to succeed.”

Mr Lineker tweeted last night: “Thanks for all the congratulatory messages. I am pleased that the tribunal has endorsed my contention that I have not failed to pay any taxes or National Insurance by reason of the IR35 rules.”