PGMOL v HMRC employment status case to be reheard

Court of Appeal sends £584,000 employment status case back to First Tier Tribunal after HMRC appeal

The Court of Appeal (COA) has published its verdict in a £584,000 employment status case involving professional football referees, instructing both parties to prepare for a rehearing – a development which signals progress for HMRC, albeit not a victory.

After the tax office had its appeal granted by the COA, that took the view certain decisions made in the First Tier Tribunal (FTT) and the Upper Tier Tribunal (UTT) were incorrect, the case PGMOL v HMRC must be reconsidered at a second FTT.

This means that neither parties are any closer to learning if Professional Game Match Officials Limited (PGMOL) had wrongly engaged 60 professional football referees as self-employed workers. Although, the latest turn of events is likely to give HMRC confidence heading into the next FTT.

The case itself was first heard in 2018, with HMRC taking the view that referees engaged by PGMOL between 2014 and 2016 should have been working as employees of the refereeing body. As a result, PGMOL was issued with a tax bill in the region of £584,000, which accounted for missing employment taxes that HMRC deemed payable.

PGMOL contested this successfully at the FTT. Unsatisfied with this outcome, HMRC appealed at the UTT, but to no avail. As a result, the taxman escalated the case to the COA, which issued its decision on 17th September.

MOO (and Control) central 

Mutuality of Obligation (MOO) has so far been the focal point of this case. Whether or not referees were mutually obligated to work for PGMOL in the way that employees are for their employer has been hotly debated.

The FTT and, subsequently, the UTT were both in agreement that MOO did not exist in these engagements. However, the COA interpreted things differently and didn’t agree with the way MOO was applied, as the case notes state:

“The appeal should be remitted to the FTT for the FTT to consider, on the basis of its original findings of fact, whether there were sufficient mutuality of obligation and control in the individual contracts for those contracts to be contracts of employment.”

Impact on CEST clear 

That this case is still hanging in the balance despite HMRC’s insistence that MOO exists in every engagement casts further doubt over the government’s Check Employment Status for Tax (CEST) tool, which also works off the basis that MOO is automatically present.

If HMRC’s stance on MOO is overruled, all employment status and IR35 status determinations made based on CEST’s perception of MOO could be incorrect. To say that the eventual outcome of this case could give thousands of contractors legitimate grounds to challenge IR35 decisions made by their client is not an overstatement.

Taking this into consideration, businesses are advised not to rely on CEST to determine the IR35 status of contractors or the employment status of sole traders. HMRC’s tool is not mandatory and independent status assessments provide a more accurate assessment and one that is based on case law.

Pending IR35 case decision faces further delay

In all of this, there’s also the delayed Northern Lights Solutions Limited v HMRC case to consider. The judges in this £70,000 IR35 case recently held off making a decision until the PGMOL verdict was reached. But with this case still in limbo, the fate of locum doctor George Mantides, of Northern Lights Solutions Limited, looks no closer to being resolved.

Staggering sums signal importance of compliance 

While it seems there is still some way to go until the PGMOL verdict is reached, regardless of the outcome, there are valuable lessons to be learned, as our CEO, Seb Maley, told Contractor UK:

“A case of this magnitude – and one involving such staggering sums – serves as an important reminder of the need to engage people under the correct employment status. Make mistakes and businesses can easily find themselves caught up in long-running, high-profile cases with devastating financial consequences.”