The latest decision by the Supreme Court has ruled that the football referees have zero hours contracts for tax and NIC reasons.
The Supreme Court decided that the contracts required mutuality of obligation and control. Both key ingredients for a contract of employment. The case has been sent back to the tax tribunal to decide if individual circumstance amounted to a contractual of employment.
The Professional Game Match Officials Ltd engages referees to officiate at football matches in the Leagues 1, 2 and in the Championship and FA Cup. The majority of the referees only worked part time and could choose when to work.
HM Revenue & Customs had decided that football referees were actual employees and therefore the Professional Game Match Officials should pay income tax and National Insurance contributions.
The First-tier Tribunal agreed with the Professional Game Match Officials Ltd that there was a lack of mutuality of obligation and control and hence no employment contract. The contract was an overarching contract between the Professional Game Match Officials Ltd, football clubs and the referees. The choice to accept work or decline work existed.
HM Revenue & Customs appealed the decision to the Upper Tribunal who agreed there was no absence of mutuality of obligation but said there was control. This meant the referees were not employees.
HM Revenue & Customs appealed to the Court of Appeal who rule against both Tribunals. The Court of Appeal determined there was adequate mutuality of obligation to decide this to be an employment relationship. The Professional Game Match Officials Ltd then responded by appealing to the Supreme Court.
The Supreme Court applied the cases of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance and HMRC v Atholl House Productions Ltd.
The decision in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance provides guidance to figure out when a contract of employment exists. Those ingredients are the existence of both mutuality of obligation and sufficient control by the engager. The Supreme Court found that such mutuality of obligation existed between the referees and the Professional Game Match Officials Ltd. This existed when the contract was accepted to officiate a football match.
The Supreme Court also directed that PGMOL had a sufficient degree of control over the referees due to the contractual obligations relating to conduct and sanctions on the pitch and post-match. The sanctions included restricting or denying the referees the opportunity to officiate future matches and by limiting the referees right to a performance bonus.
The decision however still leaves it unclear if the referees are definitively employees for tax purposes. The Supreme Court said the correct way to decide this matter was not to solely look at the issues of mutuality of obligation and control. It is necessary to also consider the collective effect of the contractual terms and all the circumstances of the relationship.
The case decision proves how difficult it is to decide whether a contractor or freelancer is legitimately self-employed. Employers should seek legal advice before taking on a contractor or freelancer. The Supreme Court’s direction on what constitutes a sufficient level of control appears to lower the level of control needed.
If you need any further advice and help, please do not hesitate to contact the Quest HR Advice Line on 01455 852028
