A group of football referees in England has won a tribunal against HMRC to earn the right to be considered self-employed and therefore entitled to a lower tax rate.
HMRC had previously attempted to recover PAYE tax and National Insurance Contributions (NICs) from 60 referees – some of whom officiated games in the Premier League, Championship and FA Cup – on the basis that they were employees of Professional Game Match Officials Limited (PGMOL).
However, PGMOL successfully argued that the group of referees should have been treated as self-employed workers.
What is IR35?
IR35 was first introduced in 2000 as a way to combat tax avoidance through “disguised employment”. It dictates how freelancers and contractors are taxed when working for a client.
The rules allow HMRC to “look through” an intermediary, such as a Personal Service Company (PSC), and consider whether it is appropriate for the individual to operate in PAYE and pay National Insurance contributions (NICs).
The tribunal decided the relationship between the referees and PGMOL lacked two key features of employment: mutuality of obligation (MOO) and control.
In relation to three seasons between 2013-2016, employment tribunal judge, Sarah Falk, concluded that “individual appointments to matches were engagements to perform the task of officiating at the match in question for a fee, and not contracts of service”.
Read more about IR35:
- What is IR35 and does it affect you as a business owner?
- Why rolling out IR35 into the private sector could be catastrophic for the economy
- Former BBC presenter to pay HMRC over £400,000 after losing IR35 case
- “Mistruths and denials”: HMRC accused of misleading chancellor on IR35 reforms
Following the PGMOL tribunal, Dave Chaplin, CEO of ContractorCalculator put the ruling through HMRC’s Check Employment Status for Tax (CEST) tool, which gave the answer “We are unable to determine the tax status of this engagement”.
Commenting on the case and the CEST result Chaplin says: “Had the referees or PGMOL used CEST to assess their status, the tool would have told them that it did not know the answer, and to call HMRC. HMRC would have then told them they were employees, which would have been incorrect, as a judge has now ruled that the referees are self-employed.
“This is yet another example of the CEST tool and HMRC giving misleading information when it comes to employment status.”
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said HMRC had lost the case after assuming MOO was present in every engagement.
“The tribunal disagreed,” he said.
“That, combined with a lack of control by PGMOL over the referees, clearly indicated that this was not an employee-employer engagement. Unfortunately, we have again had to rely on the courts to make this determination.”
“If HMRC is struggling to determine who is employed and who is self-employed, then so too is everyone else.”
Chamberlain added: “The best way to address this legal uncertainty is to write into a law a positive definition of self-employment.
“This would send a clear signal about who is and who isn’t self-employed, and would mean that individuals wouldn’t have to rely on the courts to get a resolution.”
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