HMRC shown red card in referees’ employment taxes case

English football referees have won a First Tier Tribunal case against HMRC’s attempt to classify them as employees rather than self-employed for the purposes of Pay As You Earn (PAYE) and National Insurance Contributions (NICs). The case highlights the complexity that can exist in determining a person’s employment or self-employment status.

Whilst a select group of the top English football referees are employed full-time by PGMOL (the Professional Game Match Officials Limited) most referees in professional English football referee in their spare time, often alongside having other employment or business interests.

HMRCHer Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... More considered that these “part-time” referees were employees of PGMOL thus requiring the application of PAYE and the payment of Class 1 NICs by employer and employee. HMRC assessed the “unpaid” amounts as due by PGMOL. However, PGMOL argued that it was not employing these referees and that the referees were in fact self-employed. As a result, PGMOL argued that it was not responsible for operating PAYE or paying any NICs and instead, any tax due is the responsibility of the self-employed referee.

The case was decided on the facts of the employment vs self-employment argument which are regularly being tested. HMRC lost this case because the judges disagreed with how HMRC had construed the key requirements for an employment relationship. The two key tests which the tribunal considered HMRC to have wrongly assessed were the amount of control PGMOL had over the referees and the “mutuality of obligation”, meaning that for an employment relationship to exist there must be a degree of obligation on the employee to provide their skills and services personally and an obligation on the employer to pay their employee. The First Tier Tribunal found that whilst PGMOL did have a degree of control over the referees (such as imposing fitness tests and requiring declarations of independence) there was not sufficient control to point towards an employment relationship. The judges identified as key the fact that the referees had the right to decide when they would be available to referee game and were able to refuse any match appointment offered to them. With regard to the mutuality of obligation, whilst the tribunal found that there was a degree of mutual obligation between the parties once a referee had been appointed to a match, it was possible for both parties to go back on that agreement for any reason without there being a breach of contract and pointed towards this as not being consistent with an employment relationship.

This case highlights that this area is an extremely complex one and those whose positions are unclear would be well advised to seek assistance. That goes for both contracting parties to the employment / self-employment arrangement as both parties could be affected by an HMRC challenge. It also demonstrates that HMRC assessments on this matter are certainly worth reviewing and may be worth challenging as it is clear that HMRC are not always correctly understanding the law. If you are concerned about your employment or self-employment status please get in touch.