Gary Lineker, the Match of the Day presenter, has emerged victorious as he settled his financial dispute with HM Revenue and Customs (HMRC). The HMRC initially demanded £4.9 million in taxes from Lineker for work he did through his ‘personal service company’ while working for the BBC starting from 2013. However, the case outcome favored Lineker.
This case is one of the most notable cases of a personal service company in the UK. Many self-employed workers in the UK work through their personal service companies, enabling them to pay taxes that are lower than what they would owe if they were directly employed. Lineker’s victory over the HMRC could inspire other self-employed workers in dispute with the HMRC to appeal their cases.
Understanding Personal Service Companies
When HMRC’s crackdown on tax avoidance schemes started, “personal service companies” became increasingly popular among freelancers and contractors as it allowed them to pay lower taxes by setting up a limited company. A significant number of workers in the UK use this arrangement, and some have suggested that it is unfair in various ways, including that it allows workers to receive pay like employees but pay lower taxes as though they were self-employed.
However, the use of personal service companies is entirely legal and is widely used in the UK. It is the tax rules that have been the subject of dispute. In the meantime, other professions such as actors and musicians have also used personal service companies for work as their popularity increases. With the tax rule issues still unresolved, the use of personal service companies will still continue.
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