Full-time result in employment status dispute

The Supreme Court has issued its decision in the significant case of Professional Game Match Officials Ltd v HMRC [2024] UKSC 29.

The case concerned the employment status for tax purposes of part-time football referees, provided for significant football games by PGMOL. The Supreme Court found that the relevant contracts contained a sufficient degree of mutuality of obligation and control and were therefore compatible with being employment contracts. However, it emphasised that the parties' relationship must be reviewed in the round. Therefore, the case was remitted to the FTT for it to consider the third limb of the employment status test, alongside the Court's findings on mutuality and control, in order to determine whether the relevant contracts were contracts of employment.

Whilst the Court's decision will be disappointing for businesses who rely on temporary or freelance workers, the increased importance of the third limb of the test provides scope to argue that a relationship is one of self-employment when viewed in the round.

Facts

This case concerned the employment status for tax purposes of part-time football referees, provided for significant football games by the appellant company, PGMOL.

The referees were engaged under overarching contracts covering the whole of the football season, and individual contracts covering each match for which they agreed to officiate. This case concerned only the individual contracts. Under these contracts, the referees signed up to officiate matches taking place the following weekend. However, until the match actually commenced, the referee could withdraw from the commitment. Likewise, PGMOL could remove the match from the referee's roster. The referees were only paid for matches they officiated. Equally, there was no obligation on any referee to sign up for matches, but it was expected they would unless there was a valid reason not to. The referees typically provided these services on a part-time basis alongside other full-time employment.

HMRC considered that each referee had an employment relationship with PGMOL for the duration their engagement under the individual contracts and therefore PAYE and National Insurance Contributions were due in respect of the fees paid to attend the matches. On the contrary, PGMOL regarded each of the referees as providing services on a self-employed basis.

Issues

PGMOL appealed to the Supreme Court against the Court of Appeal's decision, on the following two grounds:

1. The Court of Appeal was mistaken to hold that there was mutuality of obligation. The mutual obligations had to exist for at least some time before the employee provided the personal service for which they were to be paid; and
2. The Court of Appeal should also have held that there was insufficient control under the individual contracts to be considered contracts of employment.

Findings

The Supreme Court dismissed PGMOL's appeal on both grounds. In accordance with the tests set out in Ready Mixed Concrete [1968] 2 QB 497, and more recently in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501, the Supreme Court found that the contracts in question contained a sufficient degree of mutuality of obligation and control and were therefore not incompatible with being employment contracts:

1. Mutuality of obligation: the Court found against PGMOL, holding that mutuality of obligation may exist even if the parties’ obligations only exist during the period when the individual is engaged and remunerated under the individual contracts (i.e. when refereeing the match and providing a match report); and
2. Control: the Court considered that there must be a 'sufficient framework of control'. The fact that PGMOL had little scope for intervening while a referee actually performed their duties did not rule out there being a sufficient degree of control to indicate employment. Forms of control were available to PGMOL, even if these could only be imposed once the individual assignment ended. By way of analogy, the Court suggested that a hospital manager could have sufficient control over a surgeon, despite not having the expertise to intervene in the performance of an operation. The Court's determination on this limb suggests a low bar for the control test to be met.

Although the Court ruled that there was sufficient mutuality and control to indicate a contract of employment (the first two limbs of the employment status test), it emphasised that employment status must be determined in light of the third limb of the test. This requires consideration of the totality of the contractual provisions, and all the surrounding circumstances, alongside the existence of mutuality and control. Accordingly, the Court did not come to a final conclusion on the status of the referees. Instead, the case was remitted to the fact-finding First-Tier Tribunal for it to decide whether the individual contracts were contracts of employment.

Reflections

Given the ever-evolving nature of employment, this verdict helpfully clarifies the boundaries of employment income.

However, the lower thresholds for establishing both mutuality of obligation and control will be disappointing for those still disputing with HMRC over employment status and for businesses who rely on temporary or freelance workers.

This decision has been a long time coming, and there could yet be a final twist at the FTT. In downplaying the importance of mutuality of obligation and control, the Court has emphasised the third limb of the employment status test. This provides the taxpayer with an opportunity to argue that the relationship as whole is one of self-employment rather than employment.