Crushing Defeat for HMRC at PGMOL IR35 Tribunal

11th May, 2020
By 11. May 2020IR35, News
Crushing Defeat for HMRC at PGMOL IR35 Tribunal

HMRC has suffered a crushing defeat with an appeal to the Upper Tribunal in its IR35 case against the Professional Game Match Officials Limited (PGMOL). Back in 2018, HMRC raised tax and NIC assessments on the PGMOL totalling nearly £584K for the two years ended 5th April 2016, on the basis that they considered football referees to be employed. However, the tribunal ruled against HMRC on the basis that there was insufficient control and mutuality of obligation, a decision which was upheld this week at the Upper Tribunal.

The PGMOL oversees the management and administration of refereeing in professional football competitions such as the Premier League, FA Cup and the English Football League. A number of ‘Select Group’ referees are employed under full-time contracts by the PGMOL. This appeal concerned ‘National Group’ refs who refereed in their spare time alongside other full-time employments.

According to HMRC, the level of control exercised during matches was the same as for the ‘Select Group’ of referees, who are accepted as being employed. There was continual monitoring and assessment via the assessor and coaching system, and assessments fed into remuneration. PGMOL also had the ultimate right to sanction referees by suspending them from officiating, and imposed controls on off-pitch activity via the Code of Practice and Protocols.

The Tribunal agreed that the pre-season documents, including the fitness protocol and the Code of Conduct, imposed some obligations, but concluded that there were also distinct differences with employed referees. Unlike Select Group referees, National Group refs aren’t obliged to follow a particular training programme or attend training meetings and they have no obligation to accept match appointments.

Besides the issue of control, the argument rested heavily on HMRC’s interpretation of MOO.

HMRC argued that the expectation of being offered work, resulting from the practice over a period of time, can constitute a legal obligation to provide some work or perform work provided. The requirement in the Code of Practice to be readily and regularly available for matches was held by them to be more than an expectation in reality.

While accepting that during the actual engagement there would be some level of mutuality, the tribunal did not agree this resulted in an ‘employed’ status. The Tribunal’s view was the contract started when an individual match appointment was offered and accepted, and that even after acceptance the ref had the ability to withdraw from the engagement before arriving at the ground, and that PGMOL was also able to cancel the appointments.

These points were reiterated by the Upper Tier Tribunal, with Mr Justice Zacaroli also dismissing the taxman’s argument that the imposition of a contract is enough to satisfy MOO. He concluded: “We do not accept that a contract which provides merely that a worker will be paid for such work as he or she performs contains the necessary mutuality of obligation to render it a contract of service: the worker is not under an obligation to do any work and the counterparty is not under an obligation either to make any work available or to provide any form of valuable consideration in lieu of work being available.”

The Upper Tribunal ruling is particularly problematic for HMRC, as it provides further proof that HMRC’s Check Employment Status for Tax tool (CEST) does not align with employment status case law. Many firms have responded to the Off-Payroll reforms by adopting CEST, meaning that many contractors will have been incorrectly classified as ‘employed for tax purposes’ on the basis of MOO.

The verdict comes after the Lords Inquiry recently delivered a damning report on the IR35 legislation, urging the government to review the framework in favour of alternatives that were both simpler and fairer. While the report has been tersely dealt with by the Treasury, HMRC have conceded to conduct further research before the implementation of reform in April 2021. This recent Tribunal further highlights the urgent need to review the legislation’s legal discrepancies. For more information on IR35, read our updated guide here.

This content has been supplied by IR35 Guru

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