England football legend and broadcasting superstar Gary Lineker is being pursued by HMRC for a tax bill worth almost £5 million, making this one of the most prominent IR35 cases of all time. It’s not the first time HMRC has gone after top-rated television personalities regarding underpaid tax due to IR35. Only recently, Eamonn Holmes and Kaye Adams were subjected to tax tribunals by HMRC. But why do HMRC believe Gary Lineker owes so much tax, and what is IR35 legislation? We summarise the answers to these questions below.
What is IR35 and how does it apply to Gary Lineker?
Introduced in 2000, IR35 (Intermediaries Legislation) was rolled out by the government to try and stop disguised employees from being paid in a tax-efficient manner through an intermediary – such as a personal service company (limited company). Essentially, if a temporary worker (for example, a contractor) is deemed inside IR35, they’re considered to be working as an employee. Consequently, HMRC thinks they should pay tax similar to those in permanent roles. However, if a worker is outside IR35, by definition, they’re “self-employed” and can pay themselves a combination of salary and dividends. Being outside IR35 and operating a personal service company is regarded as the most tax-efficient way for contractors and freelancers to operate and the best option for maximising pay retention.
The reason HMRC believe Gary Lineker owes so much tax is solely down to IR35 legislation. When Gary was working through a limited company (Gary Lineker Media – partnered with his ex-wife Danielle Bux) on contracts with the BBC (2013 – 2017) and BT Sport (2015 – 2018), HMRC is under the impression he was inside IR35. However, he will have paid himself as if he was outside IR35.
How much is Gary Lineker said to owe?
HMRC deem Gary Lineker to owe £3,621,735.90 in unpaid income tax. He is also believed to owe £1,313,755.38 in unpaid National Insurance Contributions (NIC). As a result, HMRC are taking Lineker to a First Tier Tax Tribunal.
Gary Lineker is appealing the decision.
What are the experts saying about HMRC going after Gary Lineker?
Unsurprisingly, the news that Gary Lineker may be required to fork out £4.9 million in tax and NIC has grabbed the attention of almost everyone – especially contractors and freelancers who are faced with IR35 legislation when they work on temporary assignments. We’ve had a look at what some well-known figures in the industry have made of the investigation into Gary Lineker’s tax affairs.
Dave Chaplin, CEO of ContractorCalculator and IR35 expert said:
“The fact is that high paid freelancers like Gary Lineker now pay more tax by operating via a limited company than an employee on the same salary.
The tax efficiency by hiring someone self-employed is actually obtained by the firm that hires them, in this case the BBC, who would have avoided having to pay Employers National Insurance of 13.8 percent on top of whatever monies were paid to Mr Lineker.
To suggest that he has avoided tax is pointing the finger in entirely the wrong direction.”
The Association of Independent Professionals and the Self-Employed (IPSE) is an organisation that aims to protect the welfare of contactors and freelancers in the UK. The IPSE chairman Andy Chamberlin has said the following about the case:
“Like so many others, Gary Lineker has been targeted because of the needlessly and damagingly complex IR35 rules. He is the latest in a long line of presenters who have been dragged through the courts because of this. HMRC are on very uncertain ground here – they’ve lost several of these cases, including the recent Kaye Adams case at the Upper Tier Tribunal which could have a bearing on the outcome of this case.
The problem here is not that Mr Lineker has done something wrong, or that HMRC are trying to enforce tax legislation – it is the rules themselves. They are so complex and so open to interpretation that no one understands them, even HMRC, which is why they so frequently lose at tribunal. The recent changes to the off-payroll rules, which have been hugely controversial and costly for business, have done nothing to address this central and critical flaw.”
“The irony is that Gary Lineker may have been told by the BBC to work through a limited company.
It might not have been his choice, as was the case with several other BBC freelancers who HMRC have targeted in recent years.
HMRC’s understanding of the IR35 rules and their track record in tribunals leaves a lot to be desired. So I wouldn’t be too surprised if it’s found that Lineker is genuinely self-employed and HMRC have got things wrong yet again.
This case also highlights the potential risks of non compliance – not just to freelancers and contractors, but also to businesses that engage them. It’s vital that well informed IR35 status decisions are made from the outset.”
Good luck Gary!
The UK Contracting Support Team is a huge Lineker fan. All the best Gary!