Commissioners for His Majesty’s Revenue and Customs (Respondent) v Professional Game Match Officials Ltd (Appellant) [2024] UKSC 29

This case concerned a longstanding tax dispute between the respondent, Commissioners for His Majesty’s Revenue and Customs (HMRC), and the Appellant, Professional Game Match Officials Ltd (PGMOL). The underlying element to the dispute is whether the part-time referees that PGMOL provided for matches were to be considered ‘employees’ of the non-profit company. This determination was critical to the outcome, since if a contract of employment exists between PGMOL and the referees, then PGMOL has various obligations, such as that to deduct Income Tax and National Insurance from the payments it makes to the referees.

Facts:
On the 16th of September 2024, the UK Supreme Court handed down the anticipated decision in the long-running tax dispute between HMRC and PGMOL, the body responsible for supplying the Football Association (the FA) with match-day officials for most professional football competitions in England. PGMOL’s arguments centered on its non-profit company status and that the referees it provides are self-employed, only paid match fees and return of expenses (such as travel), and can be eligible for bonuses based on performance. The case examines PGMOL’s liabilities as to Tax and NI deductions for the part-time referees that it works with. The questions that follow this concern whether there are contracts existing between PGMOL and its referees, whether this is an individual match or a contract of employment such as a season. Alternatively, if it is a service for self-employed referees.

Relevant Law:
The relevant statute that is applicable in this dispute is The Income Tax (Earnings and Pensions) Act 2003 and The Social Security Contributions and Benefits Act 1992. The Income Tax Act imposes charges on income from employment through a ‘Pay as You Earn Scheme’, known as PAYE. In application to this case, the referees, who work part-time providing refereeing services, were paid for these duties in both income and refund of match-day expenses. The Social Security Contributions and Benefits Act is relevant for National Insurance contributions and contains different structures for self-employed and employed earners.

In addition to providing a distinction between self-employed and employment by way of social security contributions, section 122 of the act assists in defining a “contract of service” as “any contract of service or apprenticeship whether written or oral and whether express or implied.” There is no distinction between a contract of employment and a contract of service, either at common law or for these statutory purposes.

Proceedings:
The First Tier Tribunal found in favour of PGMOL, finding that there was no mutuality of obligation and, additionally, insufficient control of PGMOL over the work of the referees. These are two elements: ‘mutuality of obligation’ and ‘insufficient control,’ which are key in the determination of an employment contract. HMRC subsequently appealed to the Upper Tribunal, which agreed with the element of mutuality of obligation but disagreed with the control element, dismissing the appeal. Following this, the Court of Appeal allowed HMRC’s appeal. They found there to be sufficient mutuality of obligation and control in respect of the contracts between the referees and PGMOL that formed in respect of each individual match.

Judgment:
This case ascended to the Supreme Court, where it was heard by Lord Hodge, Lord Leggatt, Lord Stephens, Lady Rose, and Lord Richards. The bench unanimously dismissed PGMOL’s appeal, holding that the minimum requirements of mutuality of obligation and control necessary for a contract of employment between the National Group referees and PGMOL were satisfied in relation to the individual contracts. The court found that the relationship between PGMOL and its referees is an employment relationship of a contractual nature as per the common law. Having satisfied this question, it is simple to determine that they have obligations, and this is relevant to the case regarding tax.

Relying on the decision in Ready Mixed Concrete (Southeast) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, which helps establish whether there is a contract of employment as it proves the mutuality of obligations and a sufficient degree of control are elements necessary for the existence of a contract of employment. Existing in this PGMOL case, there is a mutuality of obligations requiring the employee (referees) to provide their personal service of refereeing in return for payment by the employer such as the match fees and expenses.

Mutuality of Obligations:
Mutuality of obligations requires that the employee provides his or her personal service in return for payment by the employer [40]. For the purposes of considering whether the necessary mutuality of obligations exists, a distinction must be drawn between overriding or umbrella contracts (which govern continuous employment) and individual contracts of the kind arising in this case (which govern single engagements) [44]-[45]. In the case of umbrella contracts, it may be necessary to demonstrate the continuing existence of obligations to perform work and pay for such work [46]. By contrast, in the case of individual contracts, it is not necessary that mutual obligations between the parties exist before the engagement commences [49]. Rather, sufficient mutuality of obligations may exist even if the parties’ obligations are only in existence during the period when the employee is working for the employer [55].

For the purposes of the appeal, this means that it would not be necessary to show that the referees were under contractual obligations before their arrival at the ground. Rather, the parties’ obligations in the period from the referees’ arrival at the ground on Saturday to the submission of their match report on the following Monday would satisfy the requirement for sufficient mutuality of obligations [55]. In any case, however, a referee and PGMOL were under mutual contractual obligations from an earlier point, namely the time early in the week that the referee accepted the offer of a match on the Saturday of that week [56]. It was immaterial that either party had a right to cancel the engagement without penalty; whilst the contract remained in place, the parties were under mutual obligations to each other [56]. Therefore, the individual engagements of referees to officiate at matches satisfied the test of mutuality of obligation [57].

The question of whether the employer has a sufficient degree of control over the provision by the employee of his or her services will require an assessment of the facts on each case [62]. It is not necessary that the employer should have a contractual right to intervene in every aspect of the performance by an employee of his or her duties for there to be a sufficient degree of control [69]. It is also not required that the employer has the practical ability or legal right to intervene during the performance of the employee’s duties [70]-[71]. What needs to be shown is a sufficient framework of control as regards each contract taken separately [73]. Ultimately, demonstrating that sufficient control, consistent with an employment relationship, exists may take many forms and is not confined to the right to give direct instructions to the individuals concerned [76]. Applying these principles to this case, the Court of Appeal was correct to say that the combination of contractual obligations imposed on referees as to their conduct generally during an 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 [88]. There remains the overall question whether, in the light of all relevant circumstances and applying the guidance given by the Court of Appeal in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501, [2022] ICR 1059 and by the Supreme Court in the present case, the National Group referees were engaged for individual matches under contracts of employment. The case is remitted to the FTT to determine that issue.

What does this mean for sporting bodies and employers more generally?
The arrangement PGMOL operated with its part-time referees is not uncommon across the sports industry and will undoubtedly have an impact on similar refereeing bodies that engage professionals on a match-day basis. However, the decision has wider ramifications than the sporting industry and could affect any employer relationship with agents with a short service contract period.

Written by Lana Wilks