HMRC confirms PGMOL referees are self-employed for tax purposes
HMRC’s challenge to PGMOL
HMRC has decided it will not appeal the most recent decision in the PGMOL case, bringing the dispute to a close.
PGMOL organises the refereeing of football matches across the English leagues. Outside the top tier most referees are not full time employees, but part time workers who often referee as a second job or hobby.
These referees are only paid for matches they actually officiate and can pick and choose whether to volunteer to referee matches (and can be refused by PGMOL).
HMRC thought they had caught PGMOL offside contending that referees were employees for employment tax purposes, and so payments were subject to PAYE. PGMOL disagreed, arguing that the referees were self employed. HMRC’s interpretation would have seen over half a million of tax and national insurance contributions due.
The employment status test
The case turned heavily on the core tenets of employment status factors for tax purposes, being control and mutuality of obligation.
Mutuality of obligation is the concept both parties having the obligation to provide and accept/perform work. Employers must provide employees with work (or pay them regardless) and employees must accept work given if it’s within the remit of their employment contract. Whereas for a contractor, the client has no obligation to offer work and only does so if and when it needs a task done, and the contractor has no obligation to accept work and is free to reject work offered.
Control is another key factor, whilst an employee is instructed what to do and how – being allocated tasks by a manager, a contractor is given a project and within that determines how best to approach the task. A contractor can make a profit by working more quickly.
A match played across the courts
HMRC and PGMOL clashed at the First-tier tribunal, with PGMOL coming out victorious. The Upper Tribunal, although disagreeing slightly with the FTT’s decision relating to control, ultimately dismissed HMRC’s decision. HMRC pulled one back as this was reversed at the Court of Appeal which held that the FTT had erred in law relating to mutuality of obligation and control and remitted the matter back to the FTT to reconsider. PMGOL launcher a quick counter by appealing to the Supreme Court which upheld the Court of Appeal’s decision but remitted the matter to the FTT on a revised basis, directing the FTT to focus their decision around the multifactorial approach as taken in “Read Mixed Concrete” and whether the individual engagements for each match were contracts of employment given that mutuality and control had already been found to be present.
The FTT’s final verdict
There are generally three stages for considering whether there is an employment contract
- Consider if there is personal service and mutuality of obligations
- Consider if there is sufficient control over the worker by the employer/client
- Unless stage 1 or 2 definitively determines there is no employment contract, look at the relationship in a wider, more holistic way, both in the other terms of the contract but also factors outside the contract itself
The Supreme Court had determined that there was some element of mutuality of obligation, as once referees had signed up for a match, they must deliver a personal service of refereeing (unless they were to cancel). Equally, PGMOL had control over referees, in part due to its ability to sanction referees post game.
The FTT stated that “The issue for Stage Three is whether the control identified by the Supreme Court is of a kind and degree which places the referee in a position of subordination characteristic of employment.”
Looking at the specific factors around how PGMOL operated the FTT held that whilst PGMOL had control “its nature and quality were regulatory, facilitative and developmental rather than managerial and supervisory” accordingly stage 3 of the test pointed away from a contract of employment. Similarly, when it came to mutuality of obligation, whilst there was the “irreducible minimum of mutuality” this was not sufficient for an employment contract.
Full-time whistle for HMRC
HMRC have confirmed they will not appeal the decision, meaning that PGMOL’s determination of referees as not being employees was correct. HMRC has stated that the case has “clarified how to distinguish employees and self-employed workers for tax purposes and confirmed our longstanding approach”.
The decision is a useful reminder that employment status remains a highly fact-sensitive exercise. While mutuality of obligation and control remain important considerations, tribunals will continue to assess the overall relationship when determining whether an engagement amounts to employment for tax purposes.
While HMRC may have called time on the PGMOL case, employment status remains one of the most closely scrutinised areas of employment tax. If you would like to discuss the tax treatment of your workforce or review your employment status processes, please contact a member of our Tax team.
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