Why are so many celebrities targeted for IR35?
Last month, we reported that Gary Lineker was being targeted by HMRC over a £4.9 million tax bill. Gary Lineker follows in the footsteps of many other celebrities who have been embroiled in an IR35 battle with HRMC over the last few years - including the likes of Kaye Adams, Eamonn Holmes, Lorraine Kelly and Paul Hawksbee.
These high-profile cases can drag on for years, with appeals commonplace from both parties. But why are so many celebrities investigated by HMRC? And what is causing them to be inside or outside IR35?
Gary Lineker vs HMRC
As we shared last month, HMRC is chasing Lineker for £4.9 million in tax and national insurance. The ruling found that Lineker owed tax for services he was providing to both the BBC and BT Sport. In both cases, Lineker was providing his services through his Limited Company, Gary Lineker Media (GLM).
Until further information is released on the case, the reason for the inside IR35 determination is still to be confirmed. Head of Tax at Kingsbridge, Andy Vessey comments:
“Lineker’s personal service would be a feature of the contractual arrangements - there is most likely to be MOO present and, in HMRC’s opinion, a sufficient degree of a right of control over Lineker’s manner of working. These are the three key tests of employment status, and if HMRC is of the opinion that these strongly pointing towards employment, then they will feel confident that their IR35 judgment is sound. However, this should be balanced by reference to HMRC’s letter dated 16.02.18 in which they stated they did not have sufficient facts to issue an opinion.”
Whilst the tax bill amounts to a total of £4.9 million, Vessey explains that some of this would have already been paid, “whilst HMRC has assessed tax and NIC liabilities at £5M the net liability if Lineker loses, will be less than this as credit will be given for the tax and NIC Lineker has already paid under Self Assessment.”
Gary Lineker follows Lorraine Kelly in IR35 case
As Andy Vessey notes, “parallels have been drawn with Lorraine Kelly who won her IR35 case in 2019 as the FTT found ITV was buying her brand rather than employing her. When one considers Lineker’s profile this may be an argument he may well run.”
Kelly argued that she does not appear on television as herself, but instead she performs as the chatty persona Lorraine Kelly. Control was also prominent in the case, with Kelly’s defence arguing that she has control over her performance, who she interviewed and the topics to be discussed on the show.
The celebrities placed inside IR35
Unlike Lorraine Kelly, both television presenter Eamonn Holmes and TalkSPORT radio presenter Paul Hawksbee were unsuccessful with their IR35 appeals. Currently, they have both been ruled as inside IR35, following failed tribunals. In the case of Holmes, it was not a clear result, with some aspects of his contract seen as outside. Holmes was ultimately seen as inside, with reasons including the fact that ITV paid his expenses, and ITV also had some control over his work - for example picking who Holmes interviewed on the show and even giving him a brief before. Holmes is reported to appeal this decision. Click here for a rundown of what’s happened so far in the case.
Paul Hawksbee, meanwhile, initially got an outside IR35 ruling in a first-tier tribunal back in July 2019. However, HMRC did not agree with this ruling, and they challenged Hawksbee in an Upper Tribunal in July 2020. In this case, the result swung in HMRC’s favour, with Hawksbee then deemed inside IR35. You can read an overview of the case and why Hawksbee lost in this blog.
Why is HMRC targeting celebrities?
As Andy Vessey comments, “over the last few years, HMRC has strategically targeted high-profile presenters because there are material tax revenues to be had and the signal it sends out. In terms of tribunal success, the department has had mixed fortunes, but this will not dissuade them from pursuing celebrities”.
And with HMRC now set on clawing back some of the financial losses caused by the coronavirus pandemic, we will likely see other celebrities in the firing line in the not-too-distant future.
Check your IR35 status
As a limited company contractor, you’d be hard-pressed to argue that you are working under a persona like Lorraine Kelly when completing an engineering project or creating new software for a client. So, if you want to check the status of an engagement you could use an IR35 status determination tool.
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