Professional Game Match Officials Ltd – not long until the final whistle!

What effect could this Supreme Court case have on how we decide employment tax status under the Off-Payroll Working rules?

Case law development in employment tax status

The Supreme Court heard the taxpayer’s appeal in Professional Game Match Officials Ltd v Revenue and Customs Commissioners on 26 and 27 June 2023. This case concerns whether part-time football referees engaged directly by Professional Games Match Officials Ltd (PGMOL) were employees for income tax and social security purposes. When released, the judgment will also inform whether engagements with workers who provide personal services through their own intermediary – typically a Personal Service Company (PSC) – are caught by the Off-Payroll Working (OPW) rules. It is hoped that this judgment will provide some much-needed guidance on the relevance of regulatory control in determining the status of engagements, as well as how to interpret the issue of mutuality of obligation within individual contracts. Businesses will need to ensure that their assessment processes are updated to reflect the outcome of this case, whilst managing the ambiguity of these nuanced points in the interim.

When should contractors be taxed as employees?

Determining employment status or whether an engagement is within the scope of the OPW rules is complex and involves a number of steps.

Key points must be decided by applying the relevant case law tests. Initially, this involves considering the two minimum requirements of:

  • Mutuality of Obligation (MOO) – broadly, that the individual agrees to perform personally, for consideration, work that the engager is obliged to provide; and

  • Control - the requisite control by the engager over how the individual performs their duties.

If these two requirements are met, then case law says to take a step back and consider whether the overall terms are consistent with an employment relationship bearing in mind all relevant circumstances. In essence, the two irreducible minimum tests of MOO and control are necessary, but not always sufficient to determine employment status.

The proper application of the two irreducible minimum tests is central to the PGMOL appeal. The Supreme Court’s prospective judgment has the potential to be a key decision in how these tests should be applied by businesses assessing both employment status and OPW. 

Why the Supreme Court appeal matters

Prior to reaching the Supreme Court, the PGMOL case had worked its way to the Court of Appeal (CoA). The CoA made important points on the MOO and control tests, which we believe will benefit from the Supreme Court’s review.

The CoA held that the absence of MOO in the overarching seasonal contract with referees did not determine whether there was sufficient MOO in individual match day contracts, so a single engagement can give rise to a contract of employment if work is in fact offered for payment and performed on that basis.

The CoA did not, however, offer any guidance on how ‘sufficient’ MOO might be established within individual contracts. We hope that the Supreme Court’s judgment will clarify how this test should be applied (and, in particular, whether it should be included in HMRC’s online Check Employment Status for Tax (CEST) as many commentators, and the House of Lords Finance Bill Sub-Committee, believe).

On the issue of control, where the actual performance of work is not susceptible to practical control by the engager, the CoA held that the correct question is whether a relevant framework of control exists. In this respect, the CoA considered that coaching and assessment systems, and a PGMOL Code of Practice, were relevant to whether the requisite framework of control existed as these gave PGMOL “significant lever[s] with which to influence the performance … of … individual engagements”.

Further guidance from the Supreme Court on how to determine whether the required framework of control exists when assessing the status of workers who operate with a high degree of autonomy would also be welcome, particularly for businesses who frequently engage off-payroll workers over whom they exercise limited day to day control, but who operate within an overall regulatory framework.

For example, are regulations imposed by bodies other than the client (e.g. by a professional or regulatory body) relevant if they could let the engager influence the worker’s performance?

What happens now?

Very broadly, judgments tend to follow between three to nine months after the Supreme Court hears an appeal. The Supreme Court’s decision in PGMOL might therefore not be known for a while.

In the meantime, organisations that assess the status of engagements (with either individuals or PSCs) should make sure they carefully consider and reflect the current case law tests and carefully monitor future case law developments. 

Practical steps could include:

  • Establishing whether, on their specific facts, any current status determinations might change depending on the outcome of PGMOL – these should be flagged and carefully reassessed when the Supreme Court’s judgment is handed down; and
  • Confirming that your systems allow you to demonstrate that you take ‘reasonable care’ arriving at status determinations and managing status disputes – in particular, are you using technology (like KPMG’s suite of OPW tools) to manage your risk appropriately?

Please reach out to the authors, or your usual KPMG in the UK contact, to discuss what the PGMOL case might mean for your organisation’s approach to OPW.