What does Gary Lineker’s £5m dispute with HMRC tell us about IR35 investigations – are contractors and businesses feeling the pressure from new “off-payroll” legislation?

Gary Lineker’s case is the latest high profile example of HMRC penalising contractors who they deem to be working outside of IR35. IR35 is the legislation that aims to ensure that contractors, who HMRC believes are really employees, pay the same Income Tax and National Insurance contributions as employees.
 
HMRC is to ramp up the pressure on contractors and businesses through tougher “off-payroll” regulation, with investigations intensifying.
 
HMRC claim Lineker owes them almost £5m, with over £3.6m owed in income tax and £1.3m in NI contributions, claiming he is a BBC employee, despite working for BT Sport and other businesses. Lineker’s agent argues that he has paid all his personal and that he remains a self-employed contractor and not a direct BBC employee.
 
While Lineker’s case is currently in the spotlight, he is not the only well-known figure who has been subject to scrutiny from HMRC. In the past few years, celebrities and TV presenters including Lorraine Kelly, Kaye Adams and Eamonn Holmes have also previously also been targets of HMRC investigations for similar accusations.
 
Contractors and businesses will need to be on even higher alert after recent changes in IR35 legislation. As of April 6 2021, “medium and large” employers are now responsible for ensuring those who work for them have the legally correct employment status. Previously it was the contractors who would be liable for any underpaid tax.
 
As social distancing measures wind down this summer, there is an expectation that HMRC will ramp up investigations into IR35 breaches.
 
While there has been talk from the Chancellor that this year may see a “light touched” application of the new “off-payroll” measures, companies would be wrong to think that “light touch” means “soft touch”. HMRC actions against IR35 breaches are expected to continue. With activity likely to ramp up next year, getting advice now could therefore enable businesses and contractors to pre-empt a much harsher clamp down from HMRC next year.
 
The new legislation means businesses will become a bigger target of HMRC’s, with industries with a high number of contractors such as IT particularly at risk from an increase in compliance work. Many business leaders have come out to label the new changes to IR35 as confusing, with the additional administration becoming another added burden for a huge number of businesses.
 
Both business and contractors need to make sure they are aware of how the new regulations may affect their employment arrangements and ensure they also have the right cover in place to avoid falling foul of increased pressure from HMRC.