Football referee tax dispute showcases complexities of employment status in warning to organisations who engage self-employed individuals

The Supreme Court has undermined the significance of mutuality of obligation as a legal and practical factor when assessing employment status in its judgment in the case between HMRC and football’s refereeing body, PGMOL (Professional Game Match Officials Limited).

In dismissing PGMOL’s appeal — which related to the employment status of 60 referees following receipt of a £584,000 tax bill — the employment status of individuals continues to be a key consideration for many businesses.

Here, Grace Pennington outlines what employers need to know.

Tax and employment status

In this case, the Supreme Court considered whether football referees were employees of PGMOL for tax purposes in relation to the fees they receive for refereeing matches.

PGMOL engages referees to provide their services at professional football matches, including for the Premier League, EFL (English Football League) and FA Cup. Yet PGMOL has different engagement frameworks for different groups of referees. Those who referee Premier League matches (known as the ‘Select Group’) are full-time employees of PGMOL, whereas those who officiate matches for the EFL and FA Cup (the ‘National Group’) are engaged on a self-employed basis.

This case concerns the National Group, with whom PGMOL engages on a self-employed basis, forming a contract for each match that a registered referee agrees to officiate and submit a match report on (and receive a match fee in return). While such referees can refuse an assignment, they’re required (in practice) to provide a reason for doing so. Referees can also cancel an agreed match commitment without sanction, though again they’re required (in practice) to give a reason.

Determining status — Supreme Court decision

The Supreme Court was concerned with two core aspects when determining the employment status of the referees — mutuality of obligation and control.

Mutuality of obligation is the obligation on an employer to provide work and the obligation on an individual to accept and perform that work.

Control is more fact sensitive but relates to the work itself — the extent to which the individual is controlled in the manner in which they carry out their tasks during the relationship.

The Supreme Court ruled that mutuality of obligation and control were satisfied and remitted the case back to the First-Tier Tribunal to make a decision.

Analysing employment status claims

This is an interesting case that’s consistent with the direction of travel of the judiciary when it comes to status cases. However, it undermines the significance of mutuality of obligation as a legal and practical factor when assessing status.

The Supreme Court was satisfied that the individual engagements were enough to satisfy the test of mutuality of obligation, regardless of the fact that the referee could cancel the engagement at any time without penalty. The decision means that mutuality of obligation can’t be a determining factor in its own right anymore — as such, the Supreme Court has diluted the essence of mutuality of obligation and lowered the bar as to what’s now required to get over the threshold. 

The reasoning set out by the Supreme Court in relation to control was unsurprising in that it was based on the factual matrix that existed. Relevant to the concept of control was the fact that the referees were required to pass a fitness test, attend an introductory seminar and be bound by disciplinary action (and inevitable suspension and removal from its list).

The Supreme Court took a holistic approach to the analysis of control, acknowledging that in some employment relationships there’s no direct control due to the expertise of the individual and the way in which the work is executed (as is the case with surgeons, for example). As such, the fact that PGMOL had no practical right to intervene while the referee was officiating wasn’t fatal to the finding of control. Instead, the Supreme Court was concerned with whether a framework of control existed. The referees were subject to contractual obligations as to their conduct and performance — and the right to impose sanctions impacted PGMOL’s ability to exercise control of the referees during the performance of their duties. 

While not mentioned in the judgment, it’s difficult to see how PGMOL’s two-tiered model didn’t hinder its argument. In relation to the core aspect of any referee’s role — the match itself — how could the practical reality and treatment of the Select Group and National Group be so different to warrant these two types of engagements? This is a cautionary reminder to organisations that operate different engagement models that these must be sufficiently distinct — both operationally and practically.

This case emphasises the fact-sensitive nature and nuanced analysis that employment status claims inevitably boil down to. It’s clear that no requirement for personal service — most commonly demonstrated through a genuine unfettered right of substitution — is the determining factor to a finding in favour of self-employment. Otherwise, it’s a case of considering all the facts and circumstances and weighing them up against each other. 

The risks of engaging self-employed individuals

This decision could have far-reaching consequences for any organisations  who engage self-employed individuals. The legal environment is changing and it’s becoming ever more difficult to justify legitimate self-employment. This means that engaging self-employed individuals comes with a higher level of risk. 

If freelancers and contractors (i.e., self-employed individuals) are fundamental to your business model, you should seek legal advice to understand the associated risks and whether they can be minimised.

The Government has committed to reviewing this — and this case serves as another reminder of the weighty task that lies ahead. 

Talk to us

If you need legal advice around your model of engagement or the employment status of your workforce, our employment law and recruitment sector experts are on-hand to assist.

Talk to us by giving us a call, sending us an email or completing our contact form below.