Only a few weeks ago, Gary Lineker was briefly stood down from presenting Match of the Day after controversy surrounding one of his tweets. Now he is back in the news for winning a much longer-standing battle with HMRC over his tax affairs.
As with many other TV presenters and personalities, HMRC pursued Lineker under intermediaries legislation commonly known as IR35 which was introduced to prevent employees from taking advantage of the beneficial income tax and national insurance treatment afforded to self-employed consultants.
In general, IR35 applies when an individual provides services to a client through a third party – most commonly a personal services company – in circumstances where, had the services been provided directly, the individual would be regarded as an employee. The theory goes that such "disguised employees" should not receive the same beneficial tax treatment as genuine, independent, self-employed consultants and IR35 essentially brings them into the scope of income tax and national insurance at the same rates as payable by employees.
Lineker supplied his services to BBC and BT Sport via Gary Lineker Media, a partnership between Lineker and his former wife. This arrangement, argued HMRC, fell to be assessed under IR35.
Lineker and his former wife appealed HMRC's determination on a number of grounds, including the ground that IR35 did not apply to the contracts that Gary Lineker Media entered into with the BBC and BT Sport. The Tax Tribunal determined this ground as a preliminary issue and, ruling in Lineker's favour on this issue, also allowed the appeal in full.
To understand this decision, it is important to unpack the conditions that the relevant legislation imposes for IR35 to apply:
(a) An individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”);
(b) The services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”); and
(c) The circumstances are such that (i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or (ii) the worker is an office-holder who holds that office under the client and the services relate to the office.
Lineker's case turned on the condition imposed at point (b). The services were provided under a contract between Gary Lineker Media and the client (BBC and BT Sport, respectively).
However, Gary Lineker Media was a partnership and, crucially, Lineker himself signed the relevant contracts either as partner of the partnership or for and on behalf of the partnership. As a matter of law, that meant he was a party to those contracts which were therefore "directly between the client and the worker" and IR35 could not apply.
This case shows the importance of fully testing the scope of whatever provisions or tax regimes HMRC may say apply. If a case falls on the other side of the dividing lines drawn by the tax codes, detailed and protracted arguments and interpretation of facts may well be avoided.
Given this may be a point of law of some significance, there is a possibility that HMRC will appeal the decision.