One of the most common topics of “discussion” we come across with regards to employment-related tax is the vexed question of whether an individual is an employee or self employed. The way to approach the answer to this question has taken another step forward in a recent FTT judgment.
So, what has happened and what is the background to the judgment?
Just as the football season was ending, the First-tier Tribunal (FTT) handed down its judgment in Professional Game Match Officials Ltd (“PGMOL”) v The Commissioners For His Majesty’s Revenue and Customs (“HMRC”) on 1 May. The FTT judgment is the latest “round” in a series of hearings between HMRC and PGMOL relating to the employment status of referees in PGMOL’s national group. The litigation began in 2018. In the end, it revolved around uncertainty in the legal tests to be applied in determining employment status. This culminated in a Supreme Court judgment in 2024 which established that a tripartite legal test should be applied with the matter being referred back to the FTT to determine the outcome on the third test, hence the 1 May decision.
At the relevant time the national group referees were retained by PGMOL for matches in Leagues 1 and 2, along with the FA Cup and the Championship. The relevant individuals were not retained as employees of PGMOL; indeed the national group referees generally had full-time employment outside football. In the 2018 litigation, it was found as a fact that the refereeing carried out by the national group referees was a “hobby, albeit a very serious one” and “it did not pay the bills”.
In addition, match day referees were selected from a pool of national group referees on a match-by-match basis, with there being no guarantee of an engagement. Further, a national group referee was under no obligation to accept an offer made by PGMOL to referee a match and could withdraw from an engagement without sanction up to match day.
HMRC asserted that each engagement which a PGMOL referee took up was a mini employment and that PAYE should have been accounted for by PGMOL on the fees paid for each such engagement.
The matter progressed to the Supreme Court in 2024 which set out the test which should be applied to determine employment status. The Supreme Court held that the tripartite test in Ready Mixed Concrete [1968] 2 QB 497 should be applied which involved a consideration of three stages: (i) whether there was mutuality of obligation between the purported employer and employee, (ii) whether the purported employer had sufficient control over the purported employee, and (iii) whether a multi-factorial evaluation of the relationship resulted in it being consistent with an employment relationship. The Supreme Court held that the quality of control and mutuality of obligation should also be considered as part of the multi-factorial assessment at stage (iii).
The Supreme Court’s review of previously decided case law resulted in it holding that the thresholds to be satisfied in determining if control and mutuality of obligation existed were set at a low level and held that these requirements had been met in this instance.
However, and this is the key learning point, the Supreme Court held that there had been insufficient consideration of Ready Mixed Concrete stage (iii) in the lower courts. So, the matter was remitted to the FTT for further consideration.
So, what did the FTT decide?
With the Supreme Court having found against it on two of the three Ready Mixed Concrete stages, PGMOL might have been forgiven in thinking that it was going into stoppage time 2-0 down!
However, the FTT held “this is not a finely balanced case” and held that the match group referees’ engagements did not constitute contracts of employment.
The FTT revisited “mutuality of obligation” as part of its Ready Mixed Concrete stage (iii) evaluation. It found that a number of factors pointed away from there being a contract of employment. These included the following:
- The referees generally had full-time jobs outside football, so they were not relying on refereeing to “pay the bills”; therefore, the engagements had the characteristics of a very serious hobby and not an employment.
- PGMOL had no obligation to offer refereeing assignments to any individual referee, and the referee was under no obligation to accept such assignments.
- Even when a referee had accepted an assignment the relevant individual could withdraw without sanction until match day. As PGMOL’s barrister put it: “This was a remarkable feature wholly inconsistent with an employment relationship in which a worker could simply decide to withdraw from a shift already agreed”.
The FTT also revisited the “quality of control” during its Ready Mixed Concrete stage (iii) evaluation. Clearly the referee was in charge when on the pitch and this was a factor which tilted away from there being an employment relationship. The FTT then carried out a detailed analysis of the other controls to which a referee was subject, namely adherence to match day procedures, compliance with the rules of the game and procedures on discipline and punctuality.
And here’s the next key point. A “deep dive” indicated that these controls “go with the territory” of being a referee and that these factors were just as much regulations imposed by the EFL and the FA as employment style controls imposed by PGMOL. Whether an individual is rightly classed as self-employed or is, in reality, an employee is very fact specific. Often a high level or desktop review without the detailed fact-finding and analysis will lead to the wrong conclusion.
When these factors were evaluated in the round the FTT held that the relationship between PGMOL and the referees was not one of employment.
What is the significance of the judgment?
It is self-evident that the 21st century UK economy is a “gig economy” with many workers being retained for a single “gig” or a series of “gigs”.
If HMRC had been successful, then taxpayers generally would have been put on the “back foot” in arguing that a gig engagement is not an employment contract.
However, it is important not to go to the other extreme: the judgment is not saying that a “gig” can never be an employment contract. When analysing the status of a worker retained for a gig or a series of gigs, the employer is obliged to follow the Supreme Court judgment and apply the three Ready Mixed Concrete stages to the relevant fact pattern. The outcome of this analysis will be heavily influenced by the facts in question: there is no “one size fits all” approach. Taking the time to establish the real, full facts and applying the learning from case law is the only way to be certain that the analysis produces a reliable conclusion.
Has the full-time whistle blown on HMRC?
At the time of writing HMRC has not decided whether to appeal the FTT’s judgment. Indeed, the final paragraph of the judgment notes that any party who is dissatisfied with the decision may apply for permission to appeal.
For HMRC to be successful in any appeal it would need to demonstrate either that the FTT reached an unreasonable conclusion on the facts or that the FTT made an error of law in applying the third stage of the Ready Mixed Concrete test.
But, whether or not HMRC decides to appeal, the fundamental point (about which there is no appeal available) is that employment status is very fact specific.