The Court of Appeal has ruled that the £584,000 employment status case against the Professional Game Match Officials Ltd (PGMOL) should be reheard, as it believed both the First Tier Tribunal (FTT) and Upper Tier Tribunal (UTT) made mistakes.
The case was first heard in 2018, when HMRC issued PGMOL a £584,000 tax bill after it was deemed that referees working between 2014 and 2016 should have been classed as employees of the association, not self-employed.
However, in the Court of Appeal’s ruling, Lady Justice Elisabeth Laing told the court that both the FTT and UTT had “erred in law.”
Laing said that one of the FTT’s main reasons for ruling that 60 referees were self-employed was because of a “lack of mutuality of obligation” (MOO) in the contracts.
“It considered that the fact that either side could pull out of the engagement before a game, without any breach of contract, or any sanction, negated the necessary mutuality of obligation.”
However, she added: “In my judgment, the FTT erred in law in deciding that the ability of either side to pull out before a game negated the necessary mutuality of obligation.”
Matt Fryer, head of legal services at Brookson Legal, said “it is disappointing” the case has been sent back to the FTT to apply the law “as clarified by the Court of Appeal.”
Fryer explained that the PGMOL case focuses on two key employment status tests: MOO and control.
“The Court of Appeal bridged the divide between HMRC’s traditionally held view that MOO is established when there is an obligation to undertake work and an obligation to pay for such work; versus the view that for a contract of employment MOO needs to go beyond HMRC’s simplistic view.
“The Court of Appeal confirmed the Upper Tier Tribunal’s appeal decision that ‘the individual contracts could not be contracts of employment if they merely provided for a worker to be paid for the work they did’. Further, the right for a party to withdraw from a contract without penalty or detriment is insufficient to negate MOO.”
Regarding control, Fryer said the court confirmed that “one must consider the ‘framework for control’, rather than simply controlling the task itself.”
In the PGMOL case, while it was agreed that the association “cannot influence or control the referee’s actions during a match”, it is important to consider other items for determining control such as Code of Practice, FA regulations or disciplinary processes.
Seb Maley, CEO at IR35 specialist Qdos, said the decision could “give the taxman confidence” about the case’s eventual outcome.
He stated: “Given the potential implications of this case, which could decide the outcome of others and even force HMRC to revisit its own understanding of employment law, batting it back to the First Tier Tribunal leaves everyone in limbo.
“A case of this magnitude – and one involving such staggering sums – serves as an important reminder of the need to engage people under the correct employment status.
“Make mistakes and businesses can easily find themselves caught up in long-running, high profile cases with devastating financial consequences.”