Professional Game Match Officials Ltd (PGMOL) – into extra time?

The case concerns whether part-time football referees engaged by PGMOL, under both overarching (or ‘umbrella’) seasonal and individual match day contracts, were employees for income tax and social security purposes.

The referees were required to undertake training and assessments set by PGMOL and were subject to disciplinary procedures. However, they exercised considerable autonomy in the performance of their duties, and either the referee or PGMOL could cancel a previously agreed refereeing engagement prior to match day.

Our previous article has more details regarding the background to this case.

Whether an employment relationship exists for tax and social security purposes is determined by the three tests set out in the Ready Mixed Concrete case:

• The individual must agree to provide personal service in return for remuneration (referred to as ‘mutuality of obligation’);
• The engager must be able to exercise the requisite control over how the individual carries out the work; and
• Taking all relevant circumstances into account, on balance, the overall terms of the contract must be consistent with employment rather than self-employment.

Meeting both the mutuality of obligation and control tests is necessary, but not sufficient, for an employment relationship to exist. The extent of mutuality of obligation and the degree of control are also relevant factors to be taken into account in the third ‘weighing up’ test.

Where an individual provides personal services through an intermediary (typically a Personal Service Company (PSC)) such that the Off-Payroll Working (OPW) or ‘IR35’ rules are in point, the Ready Mixed Concrete tests are applied to the hypothetical contract under which the individual and the engager would otherwise have engaged directly with each other.

PGMOL’s appeal to the Supreme Court turned on whether the individual match day contracts created the required mutuality of obligations, and whether PGMOL had the required level of control over the referees (the overarching season contracts had already been found not to be contracts of employment).

Mutuality of obligation

The Supreme Court held that a referee and PGMOL were under mutual contractual obligations from the point at which the referee accepted the offer of a match on that week. It did not matter that each party had a right to cancel the engagement without penalty prior to the commencement of the match as, whilst the contract remained in place, the parties owed each other mutual obligations. Individual engagements of referees to officiate at matches satisfied the test of mutuality of obligation.

The Supreme Court referred to the Employment Appeal Tribunal’s description of this test in the Cotswold Developments Construction case as the ‘wage-work bargain’, stating that this “perhaps more clearly pinpoints its focus”.

This raises the question of whether the Supreme Court means that, for standalone engagements at least, the mutuality of obligations test is really a simple ‘you work, I pay’ test. The fact that mutuality of obligation could still arise, despite the ability of both the referee and PGMOL to cancel previously agreed engagements without penalty, might support that view. For overarching or ‘umbrella’ contracts for a continuous engagement, it may be necessary to demonstrate a continuing obligation for the engager to offer (and pay for) and for the individual to accept work over the contract period.

Some organisations that engage contingent labour might have preferred the Supreme Court to have expanded on precisely what is meant by ‘mutuality of obligations’ – or the ‘wage-work bargain’ – and how the test is properly applied at the level of both overarching ‘umbrella’ and underlying individual contracts, as well as how it should be taken into account in the third Ready Mixed Concrete test (albeit that point was not before the Supreme Court on this appeal).

At the time of writing, HMRC have yet to make any statement on whether or not they consider the Supreme Court’s judgment supportive of their current exclusion of the mutuality of obligation test from HMRC’s Check Employment Status for Tax online tool.

A sufficient framework of control

The Supreme Court confirmed that what needs to be shown is a sufficient ‘framework’ of control as regards to each contract taken separately.

Ultimately, control consistent with an employment relationship may take many forms and is not confined to the right to give direct instructions to the individuals concerned – in our view this might set the bar somewhat lower than where some workers and organisations previously considered it to be.

The Supreme Court upheld the decision of the Court of Appeal in determining that the combination of contractual obligations imposed on referees as to their conduct generally during an individual engagement from the time the match was accepted to the time when the match report was submitted, and as to their conduct during the match, was capable of giving PGMOL a sufficient framework of control to meet the control test for employment purposes. The Court explicitly rejected that it was necessary for the engager to have a contractual right to intervene in every aspect of how an individual performs their duties.

Again, this perhaps sets the bar lower than some organisations might have thought, particularly in relation to highly skilled individuals, the nature of whose work does not lend itself to direct intervention by the engaging party.

In light of its conclusion that the mutuality of obligation and control tests were met, the Supreme Court remitted the case to the First-tier Tribunal (FTT) for it to decide whether the contracts under which the referees were engaged for individual matches were contracts of employment under the third Ready Mixed Concrete test (i.e. whether in light of all the circumstances, those contracts are consistent with employment). It therefore remains to be seen whether the FTT will find the referees were employees and also whether there will be further appeals of any decision by the FTT in this long running litigation.

In determining that question, the Supreme Court specifically endorsed the guidance given by the Court of Appeal in Atholl House (our earlier article discusses that decision). How, in practice, the Tribunals and Courts apply the Court of Appeal’s guidance in Atholl House, and that of the Supreme Court in this case, might give further practical guidance on how organisations and individuals should approach the employment status for tax case law tests.

Also of interest is what impact the Supreme Court’s PGMOL judgment might have on assessing individuals’ statuses for employment rights purposes – particularly in light of any transition from the current employee/worker/self-employed framework to a two-part employed/self-employed model as part of the Government’s Make Work Pay programme.

Organisations that engage off-payroll workers should review and, where necessary, reassess the status of any engagements – both directly and through PSCs or other intermediaries – with workers that might be affected by the Supreme Court’s judgment in PGMOL. This is particularly important to demonstrate to HMRC that ‘reasonable care’ is taken when arriving at status assessments.

KPMG can assist businesses to:

• Identify, assess and, in light of developing case law, reassess employment status where individual contracts are involved based on the low threshold for mutuality of obligations and control in line with PGMOL; and
• Confirm whether their systems and processes are compliant and allow them to demonstrate that they take ‘reasonable care’ in arriving at status determinations and managing status disputes.

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 off-payroll working and other payroll compliance issues.

For further information please contact:

• Lee Ellis
• Eloise Knapton