Employment status - Mutuality of obligation loss for HMRC

27 May 2020

HMRC has lost its appeal to the Upper Tribunal (UT) in the Professional Game Match Officials Limited case. 

The case concerned professional football referees in the Premier League and English Football League. The First-Tier Tribunal (FTT) had ruled the referees were not employees for tax purposes and the UT has upheld that decision.

While the existence of control featured in the decision, it was the existence of mutuality of obligation between the parties that was central.

The facts

Professional Game Match Officials Limited (PGMOL) supplies referees to the top four football leagues: full time employed referees to the Premiership and Championship, and part time referees from a ‘National Group’ for leagues one and two. These part time referees joint the National Group for a season and agree to abide by certain standards when officiating at a game, in return PGMOL provided kit and training.

League one and two games need referees and these officials can only be drawn from the National Group list. However, the FTT found that when PGMOL offered a particular match to a referee, in the context of mutuality, there was no obligation for those on the list to accept a match appointment. Each match the referee agreed to officiate was itself a separate agreement. Even after a referee had agreed to a match they could withdraw for whatever reason (eg other work commitments) without punishment or the personal need to find a replacement. 

In addition, there was no requirement for anyone on the national list to officiate a minimum number of matches per season nor was PGMOL obliged to offer a minimum number of games to the referees. On this basis, the FTT found that there was insufficient mutuality of obligation to imply the overarching contract for the whole season was one of employment.

HMRC’s view of MOO

HMRC’s contention in its appeal was that mutuality is only important in determining whether there is a contract in the first place (it is on this basis that mutuality of obligation is not considered in HMRC’s CEST tool). The UT ruling rejects this approach: paragraph 49 of the ruling states “[mutuality of obligation] is an essential requirement in categorising a contract as one of employment”.

Conditions for mutuality of obligation

In reviewing the FTT decision, the UT set out minimum conditions for mutuality of obligations to apply:

  1. There must be an obligation on the individual to perform at least some work and an obligation to do so personally, stating “It is consistent with such an obligation that the employee can in some circumstances refuse to work, without breaching the contract. It is inconsistent with that obligation, however, if the employee can, without breaching the contract, decide never to turn up for work”.
  2. There must also be an obligation on the employer to provide work, or alternatively a retainer or some form of consideration (in money or money’s worth) in the absence of work. The ruling states: “We think it is insufficient to constitute an employment contract if the only obligation on the employer is to pay for work if and when it is actually done.”

As neither of these tests were met in the case the UT ruled that the FTT decision on mutuality of obligation was correct.

Future argument

It is clear that there is a significant principle at stake for HMRC in this case and we understand that it will be appealing against the UT decision. Clearly, HMRC is unlikely to change its CEST tool or guidance on its website until the case is finally settled (if then). However, given that the Off-payroll rules will apply to all organisations from 6 April 2021 and many thousands of businesses will rely on CEST and HMRC’s guidance to determine the employment status of their contract workers, it is hoped that a final clarity on the importance of mutuality of obligation will be achieved before that date.

For help and advice on off-payroll labour and all employment status issues please get in touch with your usual BDO contact or Nick Duffin or Rob Woodward

Employer Essentials index