Supreme Court Sends PGMOL Referees’ Tax Case Back to First Tribunal: What Freelancers Should Know

Freelancers across the UK, particularly those working through limited companies, will want to pay close attention to the latest development in the long-running tax status case between the Professional Game Match Officials Limited (PGMOL) and HMRC. The case, involving referees engaged by PGMOL as sole traders, highlights key issues about employment status and tax obligations that could affect contractors in various industries.

A Complex Case with Major Implications

The crux of the case is whether 60 National Group referees, engaged by PGMOL to officiate football matches, should be classified as employees rather than self-employed contractors. HMRC argues that these referees should have been treated as employees between 2014 and 2016, requiring PGMOL to deduct PAYE tax and pay employer National Insurance Contributions (NICs). The tax liability in question totals £584,000.

According to Littleton Chambers, the referees PGMOL are concerned about are those in the National Group. These are part-time referees who have full-time jobs, but who combine this with refereeing at an elite level on weekends.

Stuart Sanders from Littleton Chambers reported that it was described by a former Managing Director of PGMOL as a “very serious hobby, but one which is fitted around other paid work and which did not pay the bills.”

Sanders explained, “Such referees are paid match fees for the individual games which they officiate, together with being paid small amounts for certain compulsory training sessions.”

This dispute, however, goes beyond football referees. It touches on broader questions about employment status that affect thousands of freelancers, particularly those operating through limited companies or engaging in PAYE contracts via umbrella companies. If HMRC is successful, it could set a precedent that makes it harder for freelancers to maintain their self-employed status.

The Legal Journey So Far

PGMOL initially won its case at the First-Tier Tribunal in 2018, which ruled that the referees were not employees. HMRC appealed, but the Upper-Tier Tribunal also sided with PGMOL in 2020. However, the case took a turn when the Court of Appeal found errors in law and sent it back to the First-Tier Tribunal in 2021.

PGMOL challenged this decision, taking the case to the Supreme Court in June 2023. After a 15-month deliberation, the Supreme Court announced that the case would once again be remitted back to the First-Tier Tribunal for reconsideration.

This means the case is far from over, with no definitive ruling yet on whether these referees were truly self-employed or not. The outcome will likely influence how similar cases are handled in the future.

What Does This Mean for Freelancers?

The ruling underscores how complex employment status can be, especially for freelancers who work through limited companies or umbrella companies. The main issue is determining whether an individual is genuinely self-employed or whether their work arrangements make them an employee in the eyes of HMRC. However, each referee in this case may have had slightly different working arrangements.

Dave Chaplin, CEO of tax compliance firm IR35 Shield, said the decision reinforces the need for a detailed, multi-factorial assessment when determining employment status.

“Significantly, the Supreme Court reinforced that when an individual is paid for work done, and there is some element of control, that is merely a precondition but does not tell us the engagement status. A full multi-factorial assessment needs to be made, considering all relevant factors,” said Chaplin.

“Regrettably for PGMOL,” he added, “their case now faces a fifth hearing, having been remitted back to the First-tier tax tribunal, to consider tax matters on engagements that took place ten years ago.”

This case could have wide-ranging consequences for freelancers, particularly around IR35 and Off-Payroll Working rules. If HMRC wins, it may lead to more contractors being classified as employees, increasing their tax liabilities and limiting their ability to work through limited companies.

Seb Maley, CEO of IR35 expert firm Qdos, stressed the importance of getting employment status assessments right. “This is a landmark case that puts the issue of employment status firmly on the radar of all businesses. The fact that it will be reheard at another First Tier Tribunal shows how complex employment status can be. 

Maley said, with a £584,000 tax liability, the cause also highlights the importance of assessing employment status with care. “Employment status is complex, nuanced, easily misunderstood and misapplied. But the sheer cost of getting things wrong means it must be prioritised,” he said. 

Firms are well aware of their responsibility to assess the IR35 status of limited company contractors. However, Maley said in his firm’s experience, there’s “not enough emphasis being put on the need to ensure sole traders have their employment status assessed from the word go.” 

Key Takeaways for Freelancers

• Employment Status Matters: Freelancers need to be aware that employment status is not just about who pays them, but about the nature of the work relationship. Both businesses and individuals must consider multiple factors, such as control, mutual obligation, and financial risk when determining status.
• Potential for Precedent: The final outcome of this case could shape how HMRC approaches similar situations in the future, making it harder for freelancers to retain self-employed status and increasing tax liabilities for businesses using contractors.
• Stay Informed: If you’re working as a sole trader or through a limited company, it’s vital to stay informed about changes in employment law and tax regulations, as well as to seek professional advice when needed.

Freelancers should continue to monitor this case closely. The final ruling, whenever it comes, could have a lasting impact on freelancers and self-employed professionals across the UK.