In Commissioners for His Majesty’s Revenue and Customs v Professional Game Match Officials Ltd (“PGMO“), the Supreme Court has held that contracts between part-time football referees and their administrative body, which were entered into each time they were engaged to officiate at a particular match, met the minimum requirements necessary to establish the existence of a common law contract of employment.
PGMO provides and trains referees including those working part time. The issue was whether they were classified as employees of PGMO for tax purposes. PGMO used a software system to offer match appointments. If a referee were to accept, then a contract was formed under the terms that the referee agreed to officiate and report on the match, and in return they would receive a fee from PGMO. HMRC considered that PGMO was the employer of the part-time referees and therefore liable to make deductions for income tax and National Insurance (“NI”) contributions. PGMO challenged this before the First-tier Tribunal (“FTT”).
The FTT held that there were both overarching contracts governing the overall arrangement and individual match-specific contracts. However, it rejected HMRC’s case that either were contracts of employment, that the match fees were subject to the PAYE scheme and that the referees were ‘employed earners’ for NI purposes.
The reasoning that they were not contracts of employment were on the grounds of:
The Upper-tier Tribunal (“UTT”) dismissed HMRC’s appeal, agreeing with the reasoning of the FTT that the conclusion on mutuality of obligation was enough to determine that the match fees were not subject to the PAYE scheme despite the FTT’s mistake on the issue of control under the individual contracts.
The Court of Appeal allowed HMRC’s appeal on mutuality of obligation under the individual contracts and agreed with the UTT on the FTT’s mistake on control, so it remitted the case back to them for reconsideration. HMRC appealed to the Supreme Court against the decision of the Court of Appeal regarding the individual contracts. It did not challenge the Court’s decision that the overarching contracts were not contracts of employment.
HMRC was ultimately successful as the Supreme Court upheld their appeal. It observed that mutuality of obligation and control are essential to establish the existence of a contract of employment. However, the Supreme Court noted that it was the cumulative effect of all the contractual provisions and all the circumstances of the relationship created from the mutuality of obligations in the engagement period that made it sufficient, not just the contract and mutual obligations on their own.
The Supreme Court held that the engagement period of the referee accepting a match to submitting the report met the requirement of mutual obligations on both parties as long as the contract was in place, regardless of the ability to cancel it without penalty. The control test was satisfied because the contractual obligations on the referee’s conduct during the engagement period gave PGMO a sufficient framework of control. The ability for PGMO to impose effective sanctions played a significant part in exercising control over the referees in their performance of their duties on and off the pitch.
To discuss any of the issues raised in this article, including concerns regarding employment status, please do not hesitate to contact Daniel Onafuwa or a member of the Employment Team.
