Gary Lineker Triumphs in £4.9m Tax Battle with HMRC: What it Means for Partnerships

Key Takeaways:

  • Gary Lineker has won a £4.9 million tax battle with HMRC.
  • The case turns on the interpretation of IR35 legislation and whether it applies to partnerships.
  • The judge concluded that because Gary Lineker signed the contracts, even as a partner in the partnership, there was a direct contract between Gary Lineker and the BBC/BT Sport, meaning IR35 could not apply.

Gary Lineker, the former English footballer and current host of BBC’s Match of the Day, has won his long-standing £4.9 million tax battle with the UK’s tax authority, HMRC. The case hinged on the interpretation of IR35 legislation, which was designed to clamp down on tax avoidance by disguised employees who charge for their services via limited companies. In Lineker’s case, HMRC claimed that he should have been classed as an employee of the BBC and BT Sport for his presenting duties, rather than as a freelancer. However, Tribunal Judge John Brooks found that IR35 legislation did not apply because there were direct contracts between Lineker and both the BBC and BT Sport.

Gary Lineker Media Partnership

Gary Lineker provided his services to the BBC/BT Sport through a partnership with his former wife, Danielle Bux, called Gary Lineker Media. The tax authorities pursued him for £4.9 million it claimed should have been paid on income received between 2013 and 2018. Throughout proceedings, Lineker insisted all taxes were paid on the income via the partnership set up in 2012.

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The case is unique in that it turns on the interpretation of IR35 legislation, unlike most other IR35 cases that are decided on their facts. HMRC argued that the legislation should apply to make Gary Lineker Media liable as an intermediary to pay income tax and NIC under PAYE in respect of the fees paid by the BBC/BT Sport to the partnership.

Gary Lineker’s Direct Contracts

The judge accepted that Gary Lineker Media was a genuine partnership and that a partnership could be an intermediary for the purposes of the IR35 legislation. However, the judge concluded that because Gary Lineker signed the contracts, albeit as a partner in the partnership, there was a direct contract between him and the BBC/BT Sport. One of the conditions for the IR35 legislation to apply is that “the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (‘the intermediary’).” Therefore, the judge decided that the IR35 legislation could not apply as there was a “contract directly with the worker” even though that was also binding on the other partner and the partnership.

The judge also said that if only Danielle Bux had signed the contracts, the partnership would have been entering into the agreements with the BBC/BT Sport, but there would be no direct contracts between Gary Lineker and the BBC/BT Sport. In such a case, the intermediary legislation would apply.

HMRC May Appeal

According to Christy Wilson, a tax associate at Katten UK LLP, the judge’s decision may seem arbitrary. The outcome suggests that the IR35 legislation would apply if one partner had signed the agreements, but it would not apply if another partner had signed the agreements, even though, under partnership law, the other non-signing partner is equally bound by the agreements. She argued that it would make more sense for the court to construe the IR35 legislation purposively and to say that it does not apply to situations where there is a contract between the worker and client only and no other arrangements involving a third party.

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Wilson also believes that HMRC may seek to appeal this decision on a point of law. Additionally, HMRC may have missed an opportunity here in that they perhaps should have also raised assessments against the BBC and BT Sport on the basis that if the IR35 legislation did not apply, the relationship between the BBC/BT Sport and Gary Lineker was an employment relationship.

What this means for Partnerships

The judge’s decision has significant implications for partnerships, particularly those operating in the media industry, as it confirms that partnerships can be intermediaries for the purposes of IR35 legislation. However, it also highlights the importance of considering the specific terms of any contracts when assessing whether the legislation applies. In this case, the judge’s decision turned on the fact that there were direct contracts between Gary Lineker and the BBC/BT Sport.

Furthermore, the case illustrates the need for partnerships to consider carefully who signs any contracts relating to the provision of services, as this can determine whether IR35 legislation applies or not. Partnerships that use a similar model to Gary Lineker Media should review their arrangements in light of this decision and seek professional advice if necessary.

Final Thoughts

The outcome of the Gary Lineker tax case is a significant victory for the Match of the Day host and sets an important precedent for partnerships operating in the media industry. However, it remains to be seen whether HMRC will appeal the decision, and the case highlights the complexity of IR35 legislation and the importance of carefully reviewing any contracts to determine whether the legislation applies or not.

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Partnerships that provide services to clients through intermediaries should seek professional advice to ensure they comply with the legislation and avoid any potential penalties. While the outcome of this case is positive for partnerships, it is clear that IR35 legislation is a complex area of tax law that requires careful consideration and expert guidance.

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