Gary Lineker has become the latest celebrity to come in the crosshairs of HM Revenue and Customs (HMRC) over a £4.9m ($6.8m) tax bill, linked with IR35 legislation.
The ex-football player and BBC's Match of the Day host has been in a dispute with the taxman for well over a year about his earnings, according to tax tribunal documents.
The dispute concerns the company Gary Lineker Media — Lineker who is freelance — set up in 2012 with his wife Danielle Bux and used it to channel his earnings from the BBC and his other job with BT Sport.
HMRC claims that the 60-year-old owes £3.62m in income tax and £1.31m in national insurance as he should have been taxed as a direct employee of the BBC and sports channel BT Sport, where he covers the UEFA Champions League.
Instead, Lineker worked as a contractor through GLM, which means that he would have been remunerated partly in dividends, paying a lower rate of tax.
While the details of how he split his income through GLM were not made clear, contractors normally get paid through their firms and then pay their income to themselves partly in dividends, for which the additional tax rate is 38.1% instead of the 45% income tax rate.
Contractors also save money on national insurance, which employees and employers normally pay.
The period in question concerns the work he carried out for the BBC between 2013/14 and the 2016/17 tax years as well as 2015/16 and 2017/18 for BT Sport.
Lineker disagrees with HMRC's standing that his work fell within the ambit of IR35 and is appealing the bill.
His agent told the Telegraph: "GLM is a partnership in which Danielle Bux was a minority partner. He has paid all personal tax. The amount [owed] is notional and disputed. Gary remains a self-employed contractor for several organisations."
The sports pundit was revealed as the top earner at the BBC, taking home £1.75m in the 2019/20 financial year, but agreed a £400,000 pay cut, the broadcaster reported.
HMRC introduced new changes under the IR35 legislation — a regulation aimed at clamping down on what the government believes to be false self-employment.
Previously, if a contractor provided services to a client through a business in the public sector, the client would decide the employment status. If the business was in the private sector, it would be the one deciding the status.
However, the changes, which came into effect in April, mean all public sector clients (firms or organisations that hire freelancers and contractors) and medium or large-sized private sector clients will be responsible for deciding their workers’ employment status.
If these new "off-payroll working rules" apply to a contractor, their fees will be subject to income tax and national insurance contributions.
If a worker provides services to a public sector client, or a medium or large-sized private sector client, they should get an employment status determination from the client, as well as the reasons behind that determination, the HMRC said.
TV presenter Eamonn Holmes is currently appealing a £250,000 HMRC tax bill under the same IR35 rules, after losing his case last year.
Andy Chamberlain, director of policy at IPSE, said: "The problem here is not that Mr Lineker has done something wrong, or that HMRC are trying to enforce tax legislation — it is the rules themselves. They are so complex and so open to interpretation that no one understands them, even HMRC, which is why they so frequently lose at tribunal.
"The recent changes to the off-payroll rules, which have been hugely controversial and costly for business, have done nothing to address this central and critical flaw."
Watch: The BBC’s top earners revealed