The latest PGMOL vs HMRC ruling has been a long time coming but could be good news for firms that use freelancers and contractors.
It feels like we’ve been waiting as long for clarity in this case as Arsenal have been for a league title, but last week the latest fixture in a decade-long shoot-out between HMRC and a group of football match officials ended in victory for the referees.
In a decision with wide implications, the First-tier Tribunal (FTT) ruled that 60 match officials engaged by Professional Game Match Officials Limited (PGMOL) were genuinely self-employed and not employed by PGMOL, as HMRC claimed. As such, they weren’t liable for £584,000 in unpaid employment taxes.
The case has been rumbling on since 2018 and still may not be over yet. HMRC has 56 days from the date of the ruling to appeal, though after five previous court dates it may decide to cut its losses and move on.
Whatever HMRC does next, the verdict is a significant one for self-employed contractors, the businesses that engage them, and the UK’s flexible labour market as a whole, for a number of reasons. We’ll dig deeper in the rest of this article.
Kick-off: how it all began
The dispute started after PGMOL engaged referees between 2014 and 2016 on a self-employed basis. HMRC disagreed with this status, insisting the officials were effectively working as employees of PGMOL. According to HMRC, PGMOL should have operated PAYE and paid appropriate employer National Insurance contributions. That’s where the £584,000 comes from.
The case was initially heard by the FTT in 2018 and PGMOL won it. To cut a long story short, the dispute has since made the rounds of the Upper Tribunal, the Court of Appeal and the Supreme Court before coming back to the FTT. To say the case has gone to extra time and penalties feels like something of an understatement.
The latest finding feels definitive, even though the First-tier Tribunal can’t set precedent. The tribunal has now found decisively in PGMOL’s favour for a second time. With that, the game could finally be up.
The question of obligation
The case hinged on a couple of principles of employment case law, the first of which being mutuality of obligation (MOO).
MOO is the baseline of an employment agreement. It means an employer is obliged to provide work and pay for it, and an employee is obliged to do it.
That sounds simple enough, but as the PGMOL case proves, it can be a cause of considerable confusion when businesses engage contractors and freelancers.
In the PGMOL case, MOO clearly existed to the baseline degree, because PGMOL offered work to referees and paid them to do it. This fact was part of HMRC’s argument that the referees were effectively employed.
But the tribunal found that MOO is more nuanced than that. It also considers the nature and extent of the obligation. The Tribunal decided that PGMOL was not obliged to offer work to the referees and the referees were not obliged to take it.
In fact, referees regularly declined assignments and could withdraw from a match even after accepting it without facing sanction.
In addition, many of the match officials viewed refereeing as a paid hobby rather than a job that paid the bills.
While there was an expectation of future work on both sides, there was no obligation to either provide or accept it as there would be in a formal employer/employee situation.
The question of control
The principle of control centres on the extent to which a business directs how work is performed. The more control a business exerts over a worker, the more that points towards employment rather than self-employment.
Clearly, PGMOL exerted some control over the referees they engaged. If they wanted to be paid, the referees had to be at the right place at the right time and perform the duties of a match official.
But the tribunal ruled that, during games, match officials are autonomous. They obey the laws of the game rather than the rules of an employer. The ultimate oversight is provided by the Football Association, not PGMOL.
In other words, the referees were subject to regulatory control, as many contractors are. They were not subject to managerial or supervisory control in the way most people would understand it.
This finding undermined HMRC’s insistence that an employer-employee relationship existed between PGMOL and its referees.
Taken together, arguments around MOO and control persuaded the tribunal that the referees were genuine contractors rather than employees.
“Even though the irreducible minimum MOO and control existed, when looking at everything else (the referees’ right to decline or withdraw from matches without sanction, the hobby like nature of the work alongside full time jobs, the limited and mostly regulatory nature of control etc.), the tribunal decided that the overall relationship was not consistent with employment,” says Ryan Dawson, IR35 Project Manager at Kingsbridge.
The bigger picture
So, what does the ruling mean for flexible labour more widely? Perhaps most importantly, it means that, when it comes to employment status, things aren’t always what they seem.
“The case is a reminder that status is, and always has been, about the reality of the working relationship – not simply how it appears on paper or how a tool interprets it,” says Kingsbridge Managing Director Andy Robinson.
“While HMRC has understandably sought consistency through mechanisms like CEST, cases like this underline the often severe limitations of a one-size-fits-all approach.”
HMRC’s Check Employment Status for Tax tool (CEST) is likely to come under greater scrutiny in the wake of the verdict. Increasingly, CEST appears too simplistic a tool for the realities of the modern flexible labour market.
The verdict, stated tax and payroll expert Carolyn Walsh, “renders third party employment status tools which rely on (MOO) to provide a self-employed or outside IR35 result, pretty much useless.”
Case by case assessment
Perhaps the key takeaway for businesses engaging contractors is that laws around status are nuanced and every case needs to be assessed on its own merits.
“For organisations navigating IR35 and employment status more broadly, the takeaway is clear,” says Robinson. “Blanket assumptions are risky, and over-reliance on simplified tools can leave gaps. A more holistic, case-by-case assessment remains essential.”
Where MOO is concerned, the PGMOL verdict suggests that the absence of obligation between engagements points firmly towards self-employment. It also suggests that both mutuality and control are less narrowly defined than HMRC had sought to claim.
The need for simplicity
So it may have come in the last minute of extra time, but the ruling feels like something of a win for businesses that use contractors and self-employed workers.
Minimum levels of mutuality and control are present in almost every working engagement. The PGMOL ruling makes it clear that, at this baseline level, they don’t prove that a contractor is actually an employee.
More widely, the case has also shown up a system that now seems increasingly unfit for purpose.
“When a case has been tested repeatedly over the best part of a decade, reaching the highest levels of scrutiny, it raises a fair question,” says Robinson. “Is the current system delivering the clarity that businesses and individuals across all points of the supply chain need not just to survive but thrive in our economic landscape?”
Getting support
Navigating legislation and ensuring compliance can be challenging. Kingsbridge offers tailored support, including expert guidance on IR35 status assessments, compliance strategies, and risk mitigation. Their team is dedicated to helping recruiters, contractors and businesses understand and adapt to the evolving tax landscape.
If you’re still unsure or are looking for an expert to talk to, Kingsbridge can offer guidance on compliance strategies, and risk mitigation.
Speak to the Kingsbridge team – they’ll be more than happy to answer your questions.
