The Supreme Court this week published its much anticipated decision in Commissioners for His Majesty’s Revenue & Customs v PGMOL (Professional Game Match Officials Limited) relating to the tax status of ‘self-employed’ referees. The outcome was a yellow card for the PGMOL and it may get worse.   The case concerned whether Level 1 National Group referees, who are engaged by the PGMOL to referee in Championship and FA Cup matches (and occasionally as fourth officials in Premier League fixtures) should properly be classified as employees of PGMOL for tax and national insurance purposes. PGMOL argued they should not. HMRC, no doubt buoyed by other recent victories against high profile TV personalities like Adrian Chiles and Stuart Barnes, argued that they should.

The National Group referees were engaged by PGMOL via  annual over-arching “umbrella” contracts. Specific match appointments were then offered to the referees on a week to week basis via a software portal which they were free to accept or reject (although if an appointment was rejected the PGMOL would typically want to know why). Having accepted an appointment the referee was still able to back out up until the point they arrived at the ground on match day but this typically only happened due to illness, injury or last minute changes in other work commitments.  Many of them had other ‘day jobs’ during the week. PGMOL could also revoke or change appointments right up to the last minute.  

The test of employment status for tax purposes is complex and multi-faceted but a number of gateway tests must be met before employment can potentially come into the equation.  These prerequisites include two particular factors -  mutuality of obligation and control - which were put under the microscope and central to the dispute in this case.

It was accepted that there was no mutuality of obligation during the gaps between match appointments but the Supreme Court ruled that there was mutuality of obligation from the point a referee accepted a match appointment until submission of the post-match report.  It was irrelevant that the parties were free to cancel the arrangement without penalty.  Unless and until an engagement was cancelled they owed obligations to each other.  

Perhaps more controversial was the Court’s finding and reasoning in relation to control. The more control an ‘employer’ has the more likely it is that the arrangement amounts to a contract of employment.   The Supreme Court emphasised what it was looking for was a “sufficient framework of control”. PGMOL did not need to control each and every aspect of the work. Indeed, that is often not possible anyway. In this case FA rules require referees to be institutionally independent in the exercise of their officiating powers. In other contexts the specialist nature of the role may make intervention and control by the engager impracticable or even unlawful. As the Supreme Court noted, a hospital manager would not intervene where a surgeon was performing an operation in a competent manner nor would an opera house manager instruct an experienced conductor to change the tempo.  However, what matters is that the employer has the right to intervene and that some control is exercised even if only in incidental or collateral matters.  

In this case the Court found there was a sufficient degree of control by reason of the contractual obligations imposed upon referees as to their conduct generally during an engagement and the potential sanctions which the PGMOL could impose at the end of an individual engagement.  For instance, if a referee breached match day procedures the PGMOL might take disciplinary action including suspending or removing a referee from its officiating roster.  Those powers, said the Supreme Court, were important because they played a significant part in enabling the PGMOL “to exercise control over the referees in the performance of their duties, on and off the pitch”. That sets the bar rather low.  

So a bad day for the PGMOL but it does not automatically follow because there was mutuality of obligation during individual match appointments and because the PGMOL had a sufficient degree of control that the referees were and are employed by the PGMOL. The case has been remitted back to the First Tier Tribunal to decide having regard to all of the relevant factors whether these arrangements should properly be regarded as employment.  Other persuasive factors may still come to the PGMOL’s rescue but given the weight often attached to mutuality and control, HMRC will feel they have gone one nil up with 90 minutes fast approaching.  

The sports sector is one where there is a long tradition of using contractors for certain types of work and for that reason HMRC has been paying it much more attention in recent years. While the PGMOL anxiously waits to see if its yellow card will be upgraded to a red the Supreme Court’s decision, particularly on the question of control, will give many other sports organisations and businesses much food for thought.  Where the objective is to avoid an employment relationship with the end user/engager it is now all the more important to ensure that contractual and practical control is kept to an absolute minimum as well as ensuring the other features and terms of the arrangement are consistent with self-employment.