IR35 – background info / what this means

We’ve been receiving a few queries about IR35 and it’s something which we don’t usually cover as it’s outside of scope for SW activities.

The reasoning for sudden influx is probbaly due to the high-profile cases going on at the moment in the media.

In a nutshell, IR35 is where an intermediary company is used by an individual and they work through them.

The example currently in the media this week is for Gary Lineker who is being chased by HMRC for around £5m in unpaid tax.

He has his own company, ‘Gary Lineker Media’ which is then contracted to provide services to TV companies such as the BBC and Sky Sports, etc. Therefore the ‘contract’ is between the BBC and the company.

The company (Gary Lineker Media) then pays Lineker himself – and they receive the money as if they’re a self employed contractor to the company.

HMRC assess if the contract would have been between the BBC and Lineker, would it have been any different – and if he would have been classed as an ’employee’. If so, National Insurance contributions kick in, and obviously more tax would be due as the costs of running the third party company (Gary Lineker Media) wouldn’t apply.

There have also been a range of other recent media cases, such as Eamon Holmes (who lost his case and had to pay £0.25m back), Christa Ackroyd (had to pay back £400k), but also Lorraine Kelly who won her case against HMRC and saved paying £1.2m in charges.

Therefore it’s a complex world (and a bit of a moral one too) but in a nutshell, this doesn’t apply to SW consultants.