Mr Lineker had appealed HMRC’s decision to raise determinations that PAYE and class 1 NICs were due on income earned by the former footballer under agreements between a partnership through which his services were provided to two national broadcasters.
In G Lineker and another t/a Gary Lineker Media v HMRC [2023] UKFTT 340 (TC), the First-tier Tribunal found that, although the IR35 rules would in principle apply to arrangements where an individual’s services were supplied to a client via a partnership, Lineker had signed contracts directly with the broadcasters and so the arrangements fell outside the scope of IR35. Lineker was simply self-employed for tax purposes. As the tribunal judge noted: ‘The effect of my conclusions is that because there were direct contracts, between the BBC and Mr Lineker and BT Sport and Mr Lineker, the intermediaries legislation (IR35) does not, and cannot as a matter of law, apply. Accordingly, and notwithstanding GLM [Gary Lineker Media] being a partnership, that is the end of the matter and the appeal succeeds.’
Commenting on the decision, Thomas Wallace, director of tax investigations at WTT Group, said: ‘The key to the judgment was in establishing whether a partnership can be the subject of the IR35 provisions, whether a partnership was in existence between GL and DB, and in what capacity the contracts with the broadcasters were signed.
‘In coming to his decision, Judge Brooks established on the facts that a partnership did exist between the two parties and that a partnership could be subject to the intermediaries legislation. However, given that a partnership does not have its own legal personality, each partner acts as principle and agent to bind all other partners in all matters under his authority (Memec plc v IRC [1998] STC 754). Therefore, as a matter of law, when GL signed the contract he did so as principle of GLM and created a direct agreement between the broadcaster and himself which the intermediaries legislation could not apply to.
‘Whilst this might seem inconsistent with the fact that a partnership can be subject to IR35, the judge helpfully pointed out that had only DB signed the agreements to supply GL’s services on behalf of the partnership then it would have been a direct contract between her (as principle) and the broadcasters,’ Wallace added. ‘This would have meant that the partnership was an intermediary and the IR35 legislation could apply.’
Penny Simmons, legal director of Pinsent Masons, commented: ‘The fact that there are so many high-profile cases such as Gary Lineker’s going through the tribunal system shows that there is still far too much uncertainty over how this area of tax works. Here, the tribunal disagreed with HMRC over whether the IR35 rules even applied.
‘Reforming the IR35 rules and HMRC’s published guidance is well overdue. Legal cases like Gary Lineker’s are extremely expensive for HMRC to run so getting in place rules that collect the right amount of tax and are easier to understand is an imperative,' Simmons said.
‘We’re still waiting to hear from the Treasury over whether they are going to look again at the rules,' she added. 'However, the fact that last Autumn the government was teetering on the edge of cancelling changes to the IR35 legislation, during the Kwarteng Budget, shows how contentious IR35 has become.’
Adam Craggs, head of tax disputes at RPC, said: ‘The fact that the decision appears to turn on which of the partners in GLM executed the contracts is superficially surprising, but in view of the case law cited to the tribunal appears ultimately to be correct.
‘Those drafting the IR35 legislative scheme do not appear to have had the implications of a general partner being the intermediary at the forefront of their minds.
‘HMRC has noted that it may appeal this decision. It may also consider legislation to correct what it will doubtless view as a lacuna, but given the time that will be taken for an appeal to be heard and determined and given the tribunal’s findings of fact, it is unlikely that any appeal by HMRC would ultimately be successful.’
Mr Lineker had appealed HMRC’s decision to raise determinations that PAYE and class 1 NICs were due on income earned by the former footballer under agreements between a partnership through which his services were provided to two national broadcasters.
In G Lineker and another t/a Gary Lineker Media v HMRC [2023] UKFTT 340 (TC), the First-tier Tribunal found that, although the IR35 rules would in principle apply to arrangements where an individual’s services were supplied to a client via a partnership, Lineker had signed contracts directly with the broadcasters and so the arrangements fell outside the scope of IR35. Lineker was simply self-employed for tax purposes. As the tribunal judge noted: ‘The effect of my conclusions is that because there were direct contracts, between the BBC and Mr Lineker and BT Sport and Mr Lineker, the intermediaries legislation (IR35) does not, and cannot as a matter of law, apply. Accordingly, and notwithstanding GLM [Gary Lineker Media] being a partnership, that is the end of the matter and the appeal succeeds.’
Commenting on the decision, Thomas Wallace, director of tax investigations at WTT Group, said: ‘The key to the judgment was in establishing whether a partnership can be the subject of the IR35 provisions, whether a partnership was in existence between GL and DB, and in what capacity the contracts with the broadcasters were signed.
‘In coming to his decision, Judge Brooks established on the facts that a partnership did exist between the two parties and that a partnership could be subject to the intermediaries legislation. However, given that a partnership does not have its own legal personality, each partner acts as principle and agent to bind all other partners in all matters under his authority (Memec plc v IRC [1998] STC 754). Therefore, as a matter of law, when GL signed the contract he did so as principle of GLM and created a direct agreement between the broadcaster and himself which the intermediaries legislation could not apply to.
‘Whilst this might seem inconsistent with the fact that a partnership can be subject to IR35, the judge helpfully pointed out that had only DB signed the agreements to supply GL’s services on behalf of the partnership then it would have been a direct contract between her (as principle) and the broadcasters,’ Wallace added. ‘This would have meant that the partnership was an intermediary and the IR35 legislation could apply.’
Penny Simmons, legal director of Pinsent Masons, commented: ‘The fact that there are so many high-profile cases such as Gary Lineker’s going through the tribunal system shows that there is still far too much uncertainty over how this area of tax works. Here, the tribunal disagreed with HMRC over whether the IR35 rules even applied.
‘Reforming the IR35 rules and HMRC’s published guidance is well overdue. Legal cases like Gary Lineker’s are extremely expensive for HMRC to run so getting in place rules that collect the right amount of tax and are easier to understand is an imperative,' Simmons said.
‘We’re still waiting to hear from the Treasury over whether they are going to look again at the rules,' she added. 'However, the fact that last Autumn the government was teetering on the edge of cancelling changes to the IR35 legislation, during the Kwarteng Budget, shows how contentious IR35 has become.’
Adam Craggs, head of tax disputes at RPC, said: ‘The fact that the decision appears to turn on which of the partners in GLM executed the contracts is superficially surprising, but in view of the case law cited to the tribunal appears ultimately to be correct.
‘Those drafting the IR35 legislative scheme do not appear to have had the implications of a general partner being the intermediary at the forefront of their minds.
‘HMRC has noted that it may appeal this decision. It may also consider legislation to correct what it will doubtless view as a lacuna, but given the time that will be taken for an appeal to be heard and determined and given the tribunal’s findings of fact, it is unlikely that any appeal by HMRC would ultimately be successful.’
