HM Revenue and Customs (HMRC) has suffered another blow relating to its off-payroll working rules. In a recent tribunal case, the presiding judge Ms. Sarah Falk had given the verdict that the professional football referees were not employees but contracting professionals.
HMRC had brought a case against members of the Professional Game Match Officials Ltd (PGMOL) regarding PAYE tax and NI contributions. The tax authority had alleged that PMGOL incorrectly assessed a group of 60 football referees as independent contractors when in fact they were its employees. As a result, it had argued that the referees who had been officiating for three seasons between 2013 and 2016 should pay backdated tax and insurance contributions.
Verdict Goes Against HMRC
The defending counsel was able to successfully convince the tribunal judge that the referees should be classified as contracting professionals since the contract with PMGOL lacked two critical points for employment — Mutuality of Obligation (MoO) and control.
Judge Falk had agreed with the case made by the defence counsel stating that the referees were asked to officiate the football matches in return for a free instead of a contract of service.
This is yet another example of HMRC’s failure to grasp the importance of MoO in determining employment status. The tax authority wrongly assumes MoO to be present in all contract. That’s the reason that its Check Employment Status for Tax (CEST) tool ignores this critical factor when determining employment status.
According to a specialist at Qdos Contractor, the MoO is present in every contract but it’s absent during the actual agreement. As a result, the contractor and the end client are not under any obligation to continuework relationship. The arrangement clearly represents self-employment due to which the contractors should not be deemed inside IR35.
The Association of Independent Professionals and the Self Employed (IPSE)’s Deputy Director of Policy, Mr. Andy Chamberlain, had opined that the MoO and control of PGMOL over referees’ engagement was absent in the agreement. This was seen by the tribunal as a clear evidence of the absence of an employer-employee engagement.
According to Mr. Chamberlain, HMRC’s misunderstanding of the critical employment characteristics is the reason that it has now lost three out of four tribunal cases. The IR35 rules are confusing that has created difficulties in assessing employment status. In order to remove the confusion, Mr. Chamberlain has stated that the Government needs to provide a clear definition of self-employment. This will resolve the problem in determining the employment status thereby saving taxpayer’s money since a court resolution will not be required.