Gary Lineker’s IR35 Saga: A Legal Battle with HMRC

First what is IR35?

IR35, also known as the “intermediaries legislation,” is a set of tax regulations in the United Kingdom. The term refers to the Inland Revenue’s 35th press release, which initially outlined the legislation. IR35 is designed to determine whether a person working through an intermediary, such as a limited company or partnership, should be classified as an employee for tax purposes.

The purpose of IR35 is to prevent individuals from avoiding employment taxes by working as contractors through their own companies when, in reality, they may be considered employees. If IR35 applies, the individual is required to pay taxes and National Insurance contributions as if they were an employee

Gary Lineker v HMRC

Whilst we are sure he requires no introduction,  Gary Lineker, outside of being a crisp fanatic, is a former professional footballer and long-time host of BBCs ‘Match of the Day’ since 1999.

At the beginning of his tenure as a TV presenter, Gary contracted his services to the BBC through a partnership with his then wife, Michelle Cockayne. Following their separation in 2006, Michelle resigned as a partner leaving Gary as the sole proprietor of Gary Lineker Media (now a sole trade).

Ahead of his contract renewal for 2013, the BBC insisted on the formation of a partnership for the conducting of his work. Gary thus entered into a partnership (without advice) with his then wife Danielle Bux.

Throughout 2013/14 – 2017/18 Gary filed self-assessment tax returns detailing his portion of the partnerships profits. As Gary was under the assumption that he was a partner in a partnership and not employed, he paid income tax and National Insurance Contributions on his share of the profits.  HMRC disagreed with this treatment. 

In April 2017, HMRC wrote to Gary Lineker Media seeking a breakdown of the partnership’s income.  Following a meeting and being provided with further information from Gary, the BBC and BT Sport, HMRC issued notices of determination in respect of PAYE and NICs due on the basis that Mr Lineker was an employee of Gary Lineker Media.

During the course of 2018, HMRC issued review letters stating its opinion that if there had been a direct contract between Gary and each of BT Sport and the BBC, it would have been a contract of service, with the result that the “intermediaries legislation set out in Chapter 8, Income Tax (Earnings and Pensions) Act 2003 (ITEPA), commonly known as IR35, would apply”.

Gary and Danielle appealed this decision and between 27^th February and 1^st March 2023, Judge John Brooks heard them in the First Tier Tribunal and on the 27^th March 2023 provided his ruling, spoiler alert, he allowed the appeal and ruled in Gary and Danielle’s favour.

The following three issues were considered by the tribunal:

1. Whether ‘IR35’ applies to arrangements involving the supply of an individual’s services to a client through a partnership governed by the Partnership Act 1890, in which the individual is a partner;
2. Whether Gary Lineker Media was a partnership; and
3. Whether there was a direct contract between the Gary and each of the BBC and BT Sport.

With regard to the first issue, Gary and Michelle argued that as general partnership does not constitute a sperate legal entity, they cannot be an intermediary for the purposes of IR35. However, the tribunal rejected this argument and thus confirmed that IR35 does apply to general partnerships.

With regard to the second issue, the tribunal confirmed that Gary Lineker Media was indeed a general partnership as it was clear from the partnership agreement and the partners conduct, that there was a business carried on by Gary and Danielle with the view of profit.

With regard to the third issue, the tribunal noted that as well as the power of every partner to bind a ‘firm’ (partnership), the effect of a partner doing so under the relevant legislation is that each partner act “both as principle … and as agent, binding the firm and its partners in all matters under his authority” (the tribunal quoted the decision in Memec Plc v Inland Revenue Commissioners 1998).

As the BBC and BT Sport contracts for Gary’s service had been executed by Gary, it followed that there were contracts directly between the BBC and Gary, and between BT Sport and Gary. 

When Gary signed the 2013 and 2015 BBC contract, and the BT Sport Contract for the provision of his services, he did so as a ‘principle’, thereby contracting directly with the BBC and BT Sport. As such the IR35 legislation cannot apply as it is only applicable “where services are provided not under a contract directly between client and the worker”. In this case Gary’s services were provided under direct contracts with the BBC and BT Sport.

Had the 2013 and 2015 BBC Contract, and BT Sport Contract not been signed by Gary, but only by Michelle on behalf of Gary Lineker Media, Gary (the worker) would, in accordance with s5 of the 1890 Partnership Act, be bound to provide his services to either the BBC or BT Sport (the client).

Such services would be provided not under a contract directly between the BBC/BT Sport and Gary – in these circumstances the direct contract would be with Michelle – but under arrangements involving a third party, either Michelle acting as Gary’s agent in her capacity as a partner in Gary Lineker Media or the partnership itself given that a “third party” includes a partnership of which the worker is a member.

This is the first time that the issue of whether there was a direct contract between the worker and the client has come before the tribunal.  The decision suggests that those drafting the IR35 provisions did not have general partnerships at the forefront of their mind when doing so, even though the legislation does refer to a partnership or an unincorporated body as a potential intermediary body.  It may initially seem counter-intuitive for the result here to depend on which partner executed the contractual agreements, but the tribunal noted that was the effect of the decision. 

HMRC are not satisfied with their loss on this subject and so have sought a ‘re-match’ through an appeal to the Upper Tribunal with a provisional hearing date of 19^th and 20^th February 2024. HMRC will undoubtedly want to fill what they perceive to be a gap in the legislation.

Should you be after a bit of light bedtime reading, the full judgment of this case can be found here.

If you have any concerns about your tax position then please contact a member of the team