HMRC given red card in case against football referees

HMRC given red card in case against football referees

HM Revenue & Customs (HMRC) has lost its appeal against a group of football referees whom it deemed liable for £584,000 in a key status case with direct bearing on IR35 rules.

In a decision published last week (May 6), the Upper Tribunal dismissed HMRC’s appeal against a previous decision, ruling tax was not payable by the referees who had been engaged by Professional Game Match Officials Limited (PGMOL).

The previous decision had found the referees were not employed by the company and so income tax and national insurance to the sum of £584,000 was not payable.

The referees case first came about when PGMOL, the body that represents football referees in England, contested a tax bill from HMRC which said it owed £583,874 in tax for 2014/15 and 2015/16 as the employer of the referees.

HMRC argued the referees should be considered employees of PGMOL and therefore an obligation was on the company to pay a higher level of national insurance contributions on behalf of these individuals.

The referees officiated at matches primarily in Leagues 1 and 2 of the football league, but also in the Championship and the FA Cup, and by way of fourth official in the Premier League.

PGMOL argued that unlike in the Premier League, those who officiate in lower division matches are not directly employed. They have other day jobs and can turn down requests to take charge of matches due to other commitments.

Mutuality of obligation

The case centred on a status test known as mutuality of obligation (MOO) and control. This is the same test as used under the controversial IR35 legislation.

IR35 is designed to crack down on workers supplying their services to clients through an intermediary, such as a limited company, but who would be an employee if the intermediary was not used.

According to Contractor Calculator, which provides guidance for freelancers, the test is to establish whether a contractor is in fact a disguised employee and therefore subject to the provisions of IR35.

Mr Justice Zacaroli dismissed the taxman’s argument that the imposition of a contract is enough to satisfy mutuality of obligation.

The Upper Tribunal then held overarching contracts and individual engagements were not contracts of service because PGMOL did not have sufficient control, referees could withdraw from a match at any point and referees often supplied their own equipment and had full responsibility for managing their own fitness and pre-match preparation.

It therefore dismissed HMRC’s appeal.

An HMRC spokesperson said: “HMRC is disappointed at the findings of the Upper Tribunal. We will be appealing the findings to the Court of Appeal.”

Dave Chaplin, chief executive of Contractor Calculator, said: “This is a key tax case for all self-employed workers, and very relevant for those who are currently under attack from HMRC under IR35 reforms.

“HMRC’s interpretation and guidance on mutuality of obligation has consistently been torn down by commentators like myself, and now judges at Upper Tribunal have roundly rejected those arguments.”