In a ruling in what observers are calling “a key tax case for self-employed workers”, referees engaged by the Professional Game Match Officials body were self-employed – and not the organisation’s employees, judges at the Upper Tribunal ruled yesterday [6 May 2020], rejecting an appeal by HMRC of a 2018 First-Tier Tribunal decision that also decided against the tax authority.

PGMOL had argued that most referees should be considered self-employed and entitled to pay a lower rate of National Insurance in the original case, which involved around 60 referees who officiated at professional league matches below the English Premier League. HMRC had contended that the referees should be considered PGMOL employees and had tried to recoup £584k in back taxes for the period between 2014 and 2016.

In a 45-page document, Mr Justice Zacaroli and Judge Thomas Scott said that the critical question in the case – “where the period of the contract ends with the submission of the referee’s match report shortly after the final whistle” – was whether the absence of an ability “to step in to regulate the referee’s performance of his core obligation [officiating at the match] or to impose any sanction, until after the contract has ended means that there is not sufficient control”.  

They also went on to say that there was “insufficient Mutuality of Obligation [MOO]” and that the FTT had made no error of law in concluding that the referees “were engaged under contracts for services and were not employees”. 

Commenting, Dave Chaplin, CEO of advisory IR35 Shield and ContractorCalculator, said: “This is a key tax case for all self-employed workers, and very relevant for those who are currently under attack from HMRC under IR35 reforms.”

He went on to call on HMRC to update its Check Employment Status for Tax (CEST) tool that provides guidance on status matters. “In its current form, it does not align with the law, and will be inadvertently giving users incorrect results that are inconsistent with this binding ruling,” Chaplin said.

Also commenting was Seb Maley, CEO of specialist contractor tax adviser, who said: “This high-profile case casts doubt over HMRC’s understanding of tax status rules.

“This case exposes one of the major flaws in CEST, which takes the view that Mutuality of Obligation exists in every engagement – when it clearly doesn’t. Given MOO wasn’t present here, this case proves that HMRC’s own tool cannot be trusted.”

The House of Lords recently issued a damning report on IR35 that also criticised the tool’s shortcomings. “This is one of the many issues that the government must address before the introduction of IR35 reform in the private sector next year,” Maley said.

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