PGMOL: HMRC’s latest shot on employment status is wide of the mark

Author

Jerry Giles

Jerry is an experienced Tax Adviser specialising in advising OMB’s on succession planning and business structures. Jerry also has a particular interest in advising individuals on IHT planning.

PGMOL: HMRC’s latest shot on employment status is wide of the mark

Introduction

What now for HMRC and its CEST tool after the Upper Tribunals recent decision in the Professional Game Match Officials Limited (“PGMOL”)?

HMRC had sought to recover PAYE tax and NICs from PGMOL, on the basis that the 60 referees should have been classed as PGMOL employees. Relating to three seasons between 2013-2016, employment tribunal Judge Sarah Falk concluded that “individual appointments to matches were engagements to perform the task of officiating at the match in question for a fee, and not contracts of service”.

HMRC did not agree so PGMOL went to the FTT and won (as discussed in our earlier article on this case). HMRC appealed to the UT and PGMOL won again.

HMRC may well appeal again having failed with its appeal to the Upper Tribunal (UT) in its case against PGMOL, following the decision reached at the 2018 First-tier Tribunal (FTT), where it was determined that football referees engaged by PGMOL were not employed by the organisation.

Replay

The FTT decision in 2018 hinged largely on the arrangement’s failure to satisfy the mutuality of obligation (“MOO”) test, despite HMRC’s contention.

The UT reiterated these same points concerning MOO, which should put an end to the arguments used by HMRC to justify the omission of MOO from its Check Employment Status for Tax (“CEST”) tool.

The UT decision also picked fault with HMRC’s wish to interpret ‘expectations’ as legal obligations to offer and accept work. Mr Justice Zacaroli also dismissed HMRC’s argument that the imposition of a contract is enough to satisfy MOO.

Mr Justice Zacaroli stated that the UT did not accept that a contract which provides merely that a worker will be paid for such work as he or she performs contains the necessary mutuality of obligation to render it a contract of service. The worker is not under an obligation to do any work and the counter party is not under an obligation either to make any work available or to provide any form of valuable consideration in lieu of work being available.

Defensive frailties?

The UT ruling is problematic for HMRC. It provides further proof that HMRC’s CEST does not align with employment status case law, the result of which will be many incorrect status determinations.

This point has been made by the taxpayer and others many times over with the private sector roll out of the IR35 changes but HMRC have so far insisted that CEST is fit for purpose.

Many End Users (as defined by IR35 rules) have used the CEST tool to determine the employment status of their contractors and freelancers (Workers) ahead of the 6th April 2020 IR35 changes. As we know, these changes have been pushed back to next tax year and there are continued calls for the IR35 rules to be scrapped altogether.

Have End Users got that decision right given this UT decision?

Are there grounds for those decisions to be set aside given this UT decision?

Is it time for a statutory definition of self-employment to remove the ongoing uncertainty?

Conclusion

Here at ETC Tax we think the UT was right, CEST needs to work correctly or be scrapped and yes, a statutory definition of self-employment is long overdue. It took many years to write a statutory definition for tax residency after many cases ended up in the Courts.

If you are an End User and concerned about your IR35 obligations, lets have a chat. This issue is not going to just go away and specialist advice is strongly recommended.

 

For the football fans: PGMOL?

PGMOL is a company limited by guarantee whose three members are The Football Association Limited (the “FA”), The Football Association Premier League Limited (“the Premier League”) and The Football League Limited (“the Football League”), now referred to as the English Football League (“the EFL”).  PGMOL is funded by its members on an annual basis and is intended to be run on a “not for profit basis”, with any annual surplus being retained as a reserve to cover unexpected costs or deficits in other years. PGMOL’s role relates to the provision of referees and other match officials for matches in the most significant national football competitions, the Premier League (the top 20 clubs), the FA Cup, and the EFL (which comprises 72 clubs in the Championship League and Leagues 1 and 2).

PGMOL was established in 2001 to oversee the management and administration of refereeing in the professional game, the Premier League, the Football League and the FA Cup. Before that the FA was responsible for appointing and managing referees in the professional game as well as at lower levels, although following the formation of the Premier League there were some interim arrangements under which it and the Football League (now the EFL) had their own referee lists and organised appointments. The aims behind the formation of PGMOL included ensuring, in line with UEFA principles, that referees are appointed independently of competitions, and that a holistic approach is adopted for the professional game with a view to ensuring that a high quality and well trained pool of referees is available. The Professional Game Match Officials Limited (PGMOL) successfully argued that a group of referees – some of whom officiated in the Premier League, Championship and FA Cup – should have been treated as self-employed.

The tribunal found that the relationship between the referees and PGMOL lacked two key features of employment: mutuality of obligation, and control (the latter being very much overshadowed by MOO).

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