Have referees blown the whistle on IR35 rulings?

When the English football season was paused due to Covid-19 you may have been missing your football fix. However, during this time a very important football match was being played out. The two teams? HMRC v Professional Game Match Officials Limited (PGMOL) or referees to you and I.

What happened pre-match?

Premier League referees are employees of PGMOL and paid via PAYE with tax/national insurance deducted at source. Officials below this level (Championship and below) are currently self employed. They are paid based on match fees and expenses agreed with PGMOL. This whole tax case revolves around HMRC arguing that all football referees are employees of PGMOL, are caught by IR35 rules with relevant national insurance being due.

HMRC lost the first ruling and decided to appeal to the Upper Tribunal.

Match Highlights

The traditional rules of IR35 look at a number of factors to decide if an individual is an employee or not. This include:

  • Control – What degree of control does the client have over how the work is completed and when;
  • Substitution – Is the individual required to complete the work or can they send a substitute in their place;
  • Mutuality of obligation – Is the employer obliged to offer the individual work and are they obliged to accept.

The Upper Tribunal went on record as saying that the main factor they were going to review in this case was mutuality of obligation. They determined that although a contract was in place that this did not constitute mutuality of obligation as there was no obligation to provide work or for the referee to accept it. For mutuality of obligation to be present there must be a contractual requirement to provide work for the individual.

This key element of the case contradicts HMRC’s typical stance that as there is a contract in place then mutuality of obligation must exist by default and as such their online tool does not need to consider this.

Post March Analysis

The ruling has really shaken up the planned HMRC IR35 reforms and could have far reaching implications for all who were concerned by these changes. The new rules (which have been pushed back to April 2021) place the onus onto the business to decide if the contractor is caught by IR35 and should be subject to tax and national insurance. Certainly, more clarity is required before then from HMRC on mutuality of obligation and the implications on determining IR35.

With HMRC planning another appeal this game isn’t over yet but the second half should be interesting.