Tax tribunal: referees were self-employed for tax purposes

HM Revenue and Customs (HMRC) had attempted to recover income tax and employer National Insurance contributions (NICs) from PGMOL, arguing that the referees were in employment relationships with PGMOL. PGMOL is a company set up to provide referees and other match officials for Premier League, FA Cup and English Football League matches, which is jointly owned by the three competitions.

While PGMOL does employ a number of referees under full-time written employment contracts, the referees that were the subject of the dispute tended to undertake refereeing in their spare time, typically alongside other full-time employment. The referees must register with the Football Association (FA) and undertake FA-provided training. They are also required to comply with the FA's rules and regulations, a code of conduct and fitness level requirements.

The referees had not entered into formal employment contracts with PGMOL, but were paid match fees and expenses at an agreed rate by PGMOL using funds provided by its member leagues and competitions. Referees are not guaranteed nor obliged to accept match appointments and can mark themselves as unavailable for work for any reason, although the tribunal noted that in practice these particular referees were "at that level because they love the role and are highly committed to it".

The first-tier tribunal rejected an argument put forward by PGMOL that there were no written or oral contractual terms between it and the referees. However, it found that "those contracts were not themselves contracts of service, because there was no mutuality of obligation outside individual engagements", or matches.

The tribunal then considered whether each individual match gave rise to a contract of service. It ultimately decided that they did not. It found that there was "[nothing] in the documentation or the parties' conduct ... consistent with non-attendance amounting to a breach of contract". Should a referee have to drop out of a particular match, PGMOL would appoint a replacement and "the particular contract would simply fall away (without sanction) and no match fee would be paid". PGMOL was also able to cancel the appointment.

"[I]t is in our view relevant that the discrete contract started when an individual match appointment was offered and accepted, and that even after acceptance the referee had the ability to withdraw from the engagement before he arrived at the ground, and that PGMOL was also able to cancel the appointment," the tribunal said.

The tribunal also found that there was no "element of control" in the referees' relationship with PGMOL. Although the referees were subject to ongoing assessment and coaching, "it is advisory rather than controlling in nature", according to the tribunal.

"The referee is undoubtedly the person in charge on match day, he has full authority and his decisions are final," the tribunal said. "In reality it is hard to see how PGMOL could retain even a theoretical right to step in while a referee is performing an engagement at a match, however badly [it] thinks that the referee is doing. At most they could offer advice at the time and take action after the engagement has ended."

"Overall, we are not persuaded that PGMOL had a sufficient degree of control during (and in respect of) the individual engagements to satisfy the test of an employment relationship. It did have a level of control outside match appointments as a consequence of the overarching contract. Although some of the obligations imposed by that contract applied to matches, there was no mechanism enabling PGMOL to exercise the correlative rights during an engagement. In reality, the only sanction PGMOL could impose for failure to adhere to these commitments was not to offer further match appointments, and to suspend or remove the referee from the National Group list," it said.

Employment tax expert Chris Thomas of Pinsent Masons, the law firm behind Out-Law.com, said that although HMRC lost the case, it should act as a warning for businesses.

"It shows HMRC is challenging employment status for individuals in occupations which have historically been regarded as self-employed," he said.

"Employment status is firmly on HMRC's agenda and so any business which uses self-employed contractors should consider whether it is at risk of HMRC challenges. If the government goes ahead with changes to the tax treatment of off-payroll workers in the private sector, employment status will become even more of a headache for businesses. This will be a particular issue for the media, construction, energy and financial services sectors where personal service companies are prevalent," he said.

The case also raised some interesting procedural points, according to tax expert Jason Collins of Pinsent Masons. PGMOL had intended to opt out of the tax tribunal costs regime, but failed to do so within the permitted 28 day period. Although it had originally sought to extend the time limit to allow a late application, it declined to pursue this after HMRC opposed the extension.

"The fact that HMRC would not agree to an extension of the time limit to opt out of costs shows the importance of paying close attention to the tax tribunal rules and taking time limits seriously," Collins said.

"Although the tribunal did not have to rule on the point in this case, last year's Supreme Court decision in the BPP case showed that although the procedural rules in the tax tribunal are generally less prescriptive than in the High Court, failure to comply with directions and time limits can have very serious implications. The tribunal rules have plenty of traps for the unwary," he said.