Final whistle for HMRC over referees' employment status

Referees are normally the ones making tricky decisions. However, in the recent case of Professional Game Match Officials Limited v HMRC [2018] TC06698, they were forced to take a seat in the stands with the rest of us and wait anxiously whilst the officials weighed up a tight penalty decision. No, not Manchester City’s controversial late penalty against title rivals Liverpool last weekend, but the equally pressing question of whether a referee is self-employed for tax purposes.

Employment status is a hot topic, and we have provided relatively recent summaries on the basics. This case is slightly different in that it deals with employment status under the tax regime, which is separate from pure employment matters. Nonetheless, there is a significant overlap in the principles that employment tribunals and tax tribunals use when determining employment status, so it is still of direct relevance to employers.

Factual background

Professional Game Match Officials Ltd (PGMOL) provides referees for football matches. It does employ a number of referees under full time employment contracts for the elite competitions, but the appeal related to about 60 referees who officiate in lower leagues in their spare time and who were engaged on a self-employed basis. HMRC raised tax and NIC assessments on PGMOL on the basis that they considered these referees to be employed, which PGMOL disputed. The First Tier Tribunal (FTT) applied the Ready Mixed Concretetest, which is also used in employment law cases.

1. Mutuality of obligation

Mutuality of obligation is the obligation on an employer to provide work and the obligation on an individual to accept that work. It is an indicator of an employment relationship.

HMRC argued that the requirement in PGMOL’s Code of Practice for referees to be readily and regularly available was in practice more than an expectation. However, referees had the right to refuse engagements without being in breach of contract. They could even do so after they had accepted the engagement. PGMOL was also able to cancel the appointments without being in breach. The fact that referees were generally very willing to take on work is explained by their passion and personal ambition (rather than an obligation to do so). As a result, the FTT found that there was insufficient mutuality of obligation.

2. Control

In order for individual engagements to be contracts of employment, there must also be a ‘sufficient framework of control’.

HMRC argued that PGMOL’s Match Day Procedures document, Fitness Protocol and Code of Conduct imposed obligations on referees that gave PGMOL elements of control. PGMOL also had control over the size of the pool of referees to ensure an adequate supply of referees when needed.

PGMOL successfully countered this argument on the following grounds:

• referees were not obliged to follow a particular training programme or attend training meetings (although there was limited monitoring via the assessor and coaching system)
• on match day, the referee’s decision is final. PGMOL could not intervene during a match if it disagreed with a referee
• the Football Association alone dealt with regulatory breaches (not PGMOL), and
• referees had the right to express geographical preferences for matches and to refuse appointments.

3. Other provisions of the contract being consistent with an employment relationship

Away from these two core tests, there were a number of factors that actually pointed towards an employment relationship:

• the referees were integrated into PGMOL, and officiated wholly or substantially for it, with a significant degree of continuity in most cases
• PGMOL was primarily responsible for paying the referees. PGMOL disputed this, given that a third party (the English Football League) actually made most of the payments to referees. However, the FTT found that the reason for this was that PGMOL did not have the necessary payment processing capacity. PGMOL still had control of the payments in that it bore the relevant costs, set the rates and match fees and decided the amounts due
• the referees could not obviously be described to be in business on their own account. For example, there was no scope for them to negotiate individual fee rates, and
• PGMOL provides referees with match and training kit, together with suits to be worn to games (although referees must supply their own boots and trainers, watches, cards and whistles).

Conclusions and takeaways

All decisions in this area involve a tribunal looking at all the circumstances of a particular relationship and carrying out a balancing act by reference to the established common law principles. It’s not an exact science. In this case, the FTT concluded that there was insufficient mutuality of obligation and control to amount to employment, despite the other factors suggesting an employment relationship.

Where does that leave employers and employees who are unsure of their employment status for tax purposes? A basic understanding of the principles set out above is a good starting point, and the government has produced a handy employment status for tax tool, which can be a useful indicator. When in doubt it is best to seek specialist advice to avoid the risk of being caught offside.

You should also not assume that because you are self-employed for tax purposes, you are automatically self-employed for employment purposes (and vice versa). In this case, despite the FTT’s finding that referees are self-employed for tax purposes, PGMOL agreed that for future seasons the referees held ‘worker’ status for employment law purposes. HMRC doesn’t recognise the hybrid ‘worker’ status that exists for employment law purposes, but an ongoing government review could see an overhaul of the current regime in the coming years.

Of course, the other important consequence of this case is that referees have now had a taste of the supporter’s weekly anxiety whilst awaiting a key decision. Just maybe that will be enough to make the officials think twice before making any rogue calls when my beloved Blues step out to face Mourinho’s United at Old Trafford this weekend.