Gary Lineker’s high-profile IR35 dispute with HMRC has finally concluded, with the two parties reaching an out-of-court settlement. While the exact details remain confidential, the case offers valuable lessons for freelancers about navigating the complexities of IR35 legislation.
The news follows the ex-football star and sports commentator’s spin-off TV production company Goalhanger Films’ going into liquidation to concentrate on the growing demand for podcasts. Goalhanger Podcasts was set up in 2014 with former ITV controller Tony Pastor and former BBC executive Jack Davenport.
According to reports, Lineker will step down from hosting Match Of The Day at the end of the season.
Background of the case
HMRC pursued Lineker for a reported £4.9 million tax bill, alleging he was incorrectly operating outside IR35 rules when presenting for the BBC and BT Sport. However, it has also been reported that the more accurate sum was between £300,000 and £400,000 spread across multiple years. This is the marginal difference between employers’ National Insurance contributions (NICs) and sole trader NICs.
The crux of the matter lay in whether Lineker provided his services as a genuine freelancer through his partnership, Gary Lineker Media (GLM), or whether he should have been classified as an employee.
Initial victory and subsequent appeal:
Lineker won his initial case at the First Tier Tribunal, which found that a direct contract existed between him and his clients, thus placing him outside IR35. However, HMRC appealed the decision, leading to a scheduled hearing at the Upper Tribunal.
Out-of-court settlement:
Before the Upper Tribunal hearing, the case was settled out of court, with both parties agreeing to undisclosed terms. This leaves the specific implications of the settlement open to interpretation.
Expert commentary:
Seb Maley, CEO of IR35 specialist Qdos, highlighted the significance of the case:
This is arguably one of the biggest cases in the history of the IR35 legislation. Not only does it carry millions in tax liability, but it also involves one of the UK’s highest-profile freelancers – something HMRC has made a habit of doing in recent years.
“It’s also a case that highlights the complexity not just of IR35, but employment status – put differently, whether someone is genuinely self-employed or should be working as an employee and therefore paying employment tax.
“The profile of this case and the eye-watering sums at stake serves as a firm reminder of the importance of ensuring compliance – whether you’re a freelancer or contractor or a business that engages these workers.
Dave Chaplin, CEO of IR35 compliance firm IR35 Shield, shed light on the nuances:
This wasn’t your run-of-the-mill IR35 case. The nuances are critical. Lineker was operating through a general partnership, which meant he was already taxed like a sole trader. Almost all income tax was already paid upfront. Moreover, he paid both employer and employee National Insurance Contributions – again, due to the partnership structure.
The financial stakes everyone’s been talking about? Not quite accurate. The difference HMRC was chasing wasn’t the widely reported £4.7 million. We’re looking at a much smaller figure – somewhere between £300,000 and £400,000 spread across multiple years. Essentially, we’re talking about the marginal difference between employers’ NICs and sole trader NICs.
What lessons can freelancers learn from the Lineker case?
Lineker’s case highlights the complexities of IR35 legislation and the challenges freelancers face in determining their employment status. Even high-profile individuals with seemingly clear-cut freelance arrangements can find themselves in protracted disputes with HMRC.
Importance of structure: The structure of Lineker’s business, a partnership with his ex-wife, played a crucial role in the case. Freelancers should carefully consider their business structure and ensure it aligns with IR35 regulations.
Contractual clarity: The existence of direct contracts between Lineker and his clients was key to his initial victory. Freelancers must ensure their contracts accurately reflect the nature of their working relationship and clearly establish their independence. This includes elements such as:
Right of substitution: A genuine right to send a suitably qualified substitute to perform the work.
Control: Demonstrating that the freelancer has control over how, when, and where the work is completed.
Mutuality of obligation: Limited obligation for the client to offer work and for the freelancer to accept it.
CEST tool: While not legally binding, HMRC’s Check Employment Status for Tax (CEST) tool can be used to assess IR35 status. To remain outside IR35, freelancers should aim to meet the CEST tool’s criteria, such as demonstrating a lack of mutuality of obligation, control over their work, and genuine financial risk.
Seek expert advice: Navigating IR35 can be challenging. Seeking professional advice from IR35 specialists or tax advisors can help freelancers understand their obligations and minimise the risk of non-compliance.
Prepare for disputes: Even with careful planning and compliance measures, disputes with HMRC can arise. Freelancers should be prepared for potential investigations and have the necessary resources to defend their position.
Conclusion:
The Lineker case serves as a reminder that IR35 remains a contentious area, with significant financial implications for freelancers. By understanding the complexities, seeking expert advice, and ensuring their working arrangements are genuinely self-employed, freelancers can minimise their risk and protect their livelihoods.
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