PGMOL vs HMRC: Court of Appeal sends IR35 case back to Tribunal

PGMOL is the body responsible for match officials in English professional football, providing officials for the Premier League, the Football Association and the English Football League (EFL). Its role is to provide referees and other officials for significant matches, in particular in the Premier League, the FA Cup and the EFL, and to ensure that there is a pool of actual and future elite referees.

Those referees who officiate in the Championship, Leagues 1 and 2 and the FA Cup are referred to by the PGMOL as the National Group Referees (NGR’s).

The Court of Appeal was raised by HMRC, following on from a First-Tier Tribunal in 2018 and an Upper Tribunal in 2020. Read on for an overview of what has happened in this case and the next steps.

PGMOL’s employment process

PGMOL employs some full-time referees under written contracts of employment (‘Select Group Referees’). At the relevant time, they mostly refereed in the Premier League.

• Select Group Referees are in the FA’s Level 1.
• Level 1 also includes the part-time referees who are the subject of this appeal.
• These referees usually combine refereeing with full-time jobs in other fields.
• There were 60 such referees in 2014-15.

PGMOL pays these referees match fees and expenses. Referees do not submit an invoice but are paid automatically once they have submitted a match report and would enter their expenses on MOAS (a software programme used by the FA). National Group Referees are treated as self-employed and it is this group who is the subject of the appeal.

PGMOL First-Tier Tribunal ruling

The First-Tier Tribunal for PGMOL and HMRC occurred back in 2018. In this tribunal, PGMOL maintained that there was no contract between it and the referees and that it was ‘simply managing the interactions between them and the competitions’. This tribunal found there was no Mutuality of Obligation (MOO) or control.

This tribunal found that there was a contractual relationship between the PGMOL and the referees, but that the overarching contract was not one of employment. Whilst the tribunal found that each individual match appointment gave rise to a contract, it was not one of employment. For example, if a referee, having accepted an appointment then withdrew or the PGMOL cancelled, this was without penalty.

The First-Tier Tribunal also concluded that the PGMOL had no control over referees because their decision is final during matches.

Upper Tribunal ruling: HMRC vs PGMOL

HMRC appealed the First-Tier Tribunal ruling because the tribunal had erred in law in considering whether there was MOO and Control present. With regard to MOO the Upper Tribunal concluded:

• Minimum requirement for an employee is an obligation to perform at least some work and an obligation to do so personally.
• Minimum requirement for an employer is an obligation to provide work, a retainer or some form of consideration. When the only obligation was to pay for work if and when it was undertaken, this was considered insufficient evidence to give rise to a contract of employment.
• In both of the above, those obligations must exist throughout the whole period of the contract.

On the matter of control, the Upper Tribunal disagreed with the First-Tier Tribunal findings but given their view on MOO, they felt this would not affect their view that the referees were genuinely self-employed.

Court of Appeal ruling (2021)

Following the result from the Upper Tribunal that the referees were still seen as self-employed, HMRC still disagreed and took the case to the Court of Appeal. The Court was asked to consider whether the First-Tier Tribunal or the Upper Tribunal erred in law which gave rise to two broad questions:

• Did the First-Tier Tribunal err in law in its conclusions in the overarching contract and/or in the individual contracts and, about control in the individual contracts?
• Did the Upper Tribunal err in law in its conclusions that the First-Tier Tribunal did not err in law on the question of MOO but did err in law on the question of control in the individual contracts?

The Court found that the Upper Tribunal wrongly omitted MOO, which is necessary to show that an overarching contract is a contract of employment. The judges decided that the Upper Tribunal made a mistake in concluding that the individual contracts could not be contracts of employment if they merely provided for a worker to be paid for the work they did.

The Upper Tribunal also erred in law in upholding the conclusion of the First-Tier Tribunal that provisions in a contract that enabled either side to withdraw before performance negated the necessary MOO.

The contract and MOO

The Court of Appeal found that the fact that the individual contract lasted longer than the match (that is, from the Monday morning until the submission of the match report) was irrelevant, both because the nature of the performance required by the contract, once made, and because the performance required included the submission of the match report.

The fact that both sides could withdraw before the performance did not negate the existence of a contract.

Ultimately, the Court of Appeal allowed HMRC’s appeal because it found that the First-Tier Tribunal and Upper Tier each erred in law in their approaches to the question of MOO in the individual contracts.

In addition, the First-Tier Tribunal erred in law in its approach to the question of control in individual contracts. The appeal will now be referred back to a First-Tier Tribunal to consider, based on its original findings of fact, whether there were sufficient MOO and control in the individual contracts for those contracts to be contracts of employment.

The judges did not consider that it would be appropriate for the Court to make those assessments, which they expressed are assessments best made by a specialist fact-finding tribunal, not an appellate Court.

HMRC focused on IR35

HMRC will no doubt be pleased with this outcome as the Court has supported its interpretation of the scope of the concept of MOO. This is unlikely to be the last word on MOO, but those demanding that HMRC overhaul CEST to correctly address MOO may be left disappointed.

The case demonstrates that HMRC will not back down if they believe the ruling should be challenged. After losing both the First-Tier Tribunal and Upper Tribunal, HMRC stood their ground by taking the case to the Court of Appeal.

Businesses should ensure they have a robust IR35 process in place, for extra protection from an investigation. With the recent news that HMRC have begun compliance checks, now is the time to ensure you are working compliantly.

For assistance with IR35, whether that is insurance, consultancy, or IR35 status assessments, Kingsbridge can help. To find out more about how we can help, just email IR35@kingsbridge.co.uk or contact us.

Update 2024: The PGMOL vs HMRC case and what it means now

In 2024, the PGMOL vs HMRC case reached a critical point, where the Supreme Court “unanimously dismissed” PGMOL’s appeal, holding that the minimum requirements of mutuality of obligation and control necessary for a contract of employment between the National Group referees and PGMOL were satisfied in relation to their individual contracts.

MOO

The Supreme Court (SC) stated that in considering whether the necessary MOO exists, a distinction has to be made between an overarching contract & an individual contract (which was the point at issue with the referees). In individual contracts MOO can exist during the period when an employee is working for their employer. The Court deemed therefore that it was only necessary to demonstrate the parties’ obligations from the point that a referee showed up at the ground on matchday to the submission of their report following the conclusion of the game, & this was sufficient to indicate the existence of sufficient MOO. This supports the Court of Appeal’s view that the nature of each contract is a distinct question & that a single engagement can give rise to a contract of employment if work which has in fact been offered is in fact done for payment.

The Court said that it was irrelevant that either party had a right to cancel the engagement without penalty whilst the contract was in place because the parties were mutually obligated to one another. This I find concerning because, talking generally here,  the ability of a worker & the engager to pull out of the contract for any reason, in my view, would point to a loose relationship that the parties have with one another rather than one of mutual dependency.

HMRC will no doubt be delighted with the SC endorsing their long held view of MOO, which is contained in ESM0543, viz:

“The issue whether the worker is required to accept work, if offered, or whether the engager is obliged to offer work as available is irrelevant to the question of whether a contract exists at all during the period when work is actually being performed.”

It is because of HMRC’s longstanding & narrow interpretation of MOO that the Kingsbridge status tool does not place great weight or emphasis on this test, & certainly not on a stand alone basis, even though it is one of the key factors of employment.

Control

The hope that the SC would return some common sense to points of reference when applying this test were, unfortunately, dashed.

The Court of Appeal had previously listed various factors which could exhibit a sufficient framework of control. Whilst the SC supported the notion of a framework of control, it is still necessary to demonstrate that such a framework is sufficient to be consistent with an employment relationship. This appears to suggest therefore that a requirement to comply with regulatory or governance requirements is potentially significant in evaluating if a worker is prone to a sufficient framework of control. How can this be, where it is nigh on impossible to operate within a particular sector without being subject to certain statutory rules? It must be remembered however that the right of control test comprises four sub-tests, ie what, where, when & how, & it maybe that contracts & working practices will have to be stronger in the first three of those sub-tests so as to loosen the threat of a right of control over the worker by the engager.

Our IR35 Project Manager, Ryan Dawson, comments:

“For Contractors, the PGMOL v HMRC case once again highlights the complexity and uncertain nature of employment status matters within common law. In this case, which has now been remitted back to the FTT for its fifth hearing, the revenue successfully argued that merely by agreeing to do work for another party, match referees and the PGMOL had established mutual obligations to each other. HMRC will no doubt be delighted with the SC endorsing their long held view of MOO.

The Court said that it was irrelevant that either party had a right to cancel the engagement without penalty whilst the contract was in place because the parties were mutually obligated to one another. This means it could be much harder in the future to prove or rely on one of the key status principles that there are not mutual obligations in any work arrangement between the parties. Contractors should not place great weight or emphasis on this test and certainly not on a stand alone basis, even though it is one of the key factors of employment.

Contractors currently engaged with end-clients operating outside IR35 must not panic or take knee jerk reactions to high profile court decisions. However, when engaging with new talent, most engagers assessing workers employment status will need to clearly demonstrate a lack of control over the worker and no personal service.”

The Supreme Court restarted the IR35 merry-go-round by remitting the case back to the First Tier Tribunal for it to decide whether, in the light of all relevant circumstances, the individual contracts were contracts of employment or not.

For more information on how Kingsbridge can assist with IR35 compliance and insurance solutions, get in touch with our team today.