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May 21, 2020

PAYE at the Gate: HMRC 0 Professional Game Match Officials Limited 2

There are certain questions in life that never seem to get answered to everyone’s satisfaction. And a lot of the thornier issues revolve around the nation’s favourite sport.

No, not shouting at the telly or searching for an Irish pub when abroad. I mean the real national sport – football, fitba’, footy. The beautiful game.

(Sorry cricket, we’re talking about the UK as a whole. No doubt about this one. Go and have your tea now, there’s a good chap!)

Since forever (or since time immemorial at the very least), debate has raged endlessly between rival sets of football fans:

Pele or Maradona?

Messi or Ronaldo?

Lamps or Stevie G?

Hibs or Hearts? (Hibs, obvs.)

And depending on the colour of your lenses, a bustling centre-forward hitting the deck in the box is either a definite pen – definite pen Gary! – or something Tom Daley would be proud of.

But if there’s one thing all supporters seem to be united on, it’s the employment status of a referee.

Who hasn’t heard that well-known ditty gracing a stadium’s air on a Saturday afternoon at a quarter to four? (Perhaps, if you’re lucky, with an encore at full-time roughly an hour later.) You know the one. Absolute classic terrace chant:

The referee’s a worker! The referee’s a worker!

But is he though? Are the fans right?

Nobody’s quite sure. It’s all very taxing.

Step forward the Upper Tribunal (Tax and Chancery Chamber) to finally sort it all out for us!

What’s the score, ref?

The case was a keenly fought contest between HMRC and Professional Game Match Officials Limited, which, for ease of reference, we won’t abbreviate to PGMOL – like TULRCA, it doesn’t exactly trip off the tongue.

HMRC started the match on the front foot but they did have home advantage. They kicked off by issuing Professional Game Match Officials with assessments for PAYE and National Insurance. That was on the basis that it was the employer of what are known as the ‘National Group’ referees.

Those referees are engaged by Professional Game to officiate at football matches. Primarily in Leagues 1 and 2 of the English Football League but also in the Championship and the FA Cup, as well as ‘Fourth Official’ engagements in the Premier League. National Group referees undertake their duties in their spare time, usually alongside other full-time employment.

Professional Game also employs a number of other referees (the ‘Select Group’) under full-time written contracts – mostly to referee matches in the Premier League. The appeal did not concern them though.

The First-tier Tribunal’s decision

Professional Game was unhappy with HMRC’s decision to issue it with the assessments. It appealed to the First-tier Tribunal, arguing first of all that there was no contract at all between it and the National Group referees.

That argument was rejected by the FTT. It concluded that there was an overarching contract between each of the National Group referees and Professional Game. And also that there was a series of separate contacts between Professional Game and each National Group referee for each specific match for which a referee was engaged.

HMRC argued that one or other or both of those contracts was a contract of employment. The FTT disagreed:

  1. There was no mutuality of obligation outside individual engagements. Therefore, the overarching contract was not an employment contract; and
  1. There was insufficiency of mutuality of obligation and insufficiency of control in the individual contracts. So they also were not contracts of employment.

One-nil to Professional Game Match Officials!

Still all to play for

HMRC sought a rematch and appealed to the Upper Tribunal. It went with three up front (or grounds of appeal as they’re sometimes known). In short, it argued that the FTT erred in law by concluding:

  1. The necessary mutuality of obligation during the individual assignments was lacking for those to be contracts of service;
  1. There was also insufficient control during the individual assignments; and
  1. There lacked the necessary mutuality of obligation during the season-long overarching contracts for those to be contracts of service.

And HMRC began working the keeper from the off.

The relevance of mutuality of obligation

Their first foray forward was to argue that ‘mutuality of obligation’ is relevant only to the questions of whether (a) there is a contract at all; and (b) whether that contract contains an obligation to provide services personally and obligations which are in some way ‘work related’.

If it does, then it becomes just a case of seeing whether the remaining two conditions from the well-known Ready Mix Concrete test are fulfilled. Mutuality of obligations, so HMRC’s argument went, is not relevant to the question of whether the contract is one of employment or a contract for services.

The lynchpin of this attacking move was the decision of Elias J in Stephenson v Delphi Diesel Systems (from the 2003 season). He had said that the significance of mutuality was solely that ‘it determines whether there is a contract in existence at all’.

Elias J had also considered that the issue of whether the worker was required to accept work if offered, or whether the employer was obliged to offer work as available, was not relevant to the question of whether a contract existed at all during the period when work was actually being performed. The ‘only question’ was whether there was sufficient control.

HMRC’s sweeping attacking move was thwarted, however, by other decisions of the EAT and Court of Appeal, including another decision of Elias J himself – James v Greenwich LBC (during the 2007 season).

The Upper Tribunal (Zacaroli J and Judge Thomas Scott) held that the authorities were clear. The mutuality of obligation requirement has dual purposes. First, it can determine whether there is a contract at all. Second, it can determine whether a contract is an employment contract.

The content of the mutual obligations

There was plenty more running left in HMRC’s legs, however. A quick change of formation and it sought to get on the scoresheet by contending as follows.

The first limb of the Ready Mix Concrete test is met wherever an individual provides the services in question through their personal work or skills and the employer pays them for any work actually done. For there to be an employment contract, it is enough if the obligation on the employer was to do no more than retain the worker on its books.

In response, Professional Game decided the best form of defence was to launch a counterattack of its own. It contended that the putative employer must be under an obligation to provide either work or payment in lieu of work, and that the putative employee must be under an obligation to accept work and to carry it out personally.

So play developed into a midfield battle over the content of mutual obligations.

Again, HMRC pointed to certain passages in the authorities. These included Buckley J’s emphasis on the flexibility of the Ready Mix Concrete test in Montgomery v Johnson Underwood Ltd (2001) and a comment of Langstaff J in Cotswold Developments Construction Ltd v Williams (2006).

The Upper Tribunal decided the mutual obligations content issue as follows:

  1. As far as the obligations on the employee are concerned, the minimum requirement is an obligation to perform at least some work and an obligation to do so personally. It is not inconsistent with that obligation that the employee can in some circumstances refuse to work without thereby breaching the contract.
  1. The minimum requirement on an employer is an obligation to provide work or a retainer/some form of consideration in the absence of work. There won’t be an employment contract if the only obligation on the employer is to pay for work if and when it is actually done.
  1. The obligations must continue throughout the whole period of the contract.

The Upper Tribunal held that the FTT was clearly correct to conclude, as a matter of law, that in the absence of an obligation on Professional Game to provide at least some work (or some form of consideration in lieu of work), or in the absence of an obligation on the referee to undertake at least some work, there would be insufficient mutuality of obligation for the overarching contract to be a contract of employment.

Much obliged

HMRC kept plugging away, however. Maybe time for a well-rehearsed training ground move?

Clad in Autoclenz v Belcher regulation shooting boots, it argued that the FTT had been wrong to conclude that there was in fact no obligation on Professional Game to offer work and no obligation on the referee to accept work offered.

The Upper Tribunal, though, held that the FTT had applied the Autoclenz approach correctly.

It had made a number of critical findings. Those formed the basis of its conclusion that the case was to be contrasted with an ‘ordinary situation’ – where an entity whose function is to provide the services of a number of highly qualified individuals from a limited pool of talent on a regular basis for important commercial events would wish to impose a legal commitment on its staff to work.

Here, the referees were highly motivated and wished to make themselves available as much as possible. Thus there was no need for a legal obligation. And so Ground 3 of the appeal failed.

As to Ground 1, the FTT had found that there was some level of mutuality of obligation in the individual contracts. This was ‘for the referee to officiate as contemplated (unless he informed PGMOL that he could not) and for PGMOL to make payment for the work actually done’. But it was insufficient to make them employment contracts.

(OK, so maybe the PGMOL abbreviation does work. But let’s carry on without it.)

Professional Game could cancel an appointment without contractual limit and without committing a breach of contract. And the referee could decide not to take up the appointment if, in addition to reasons such as injury or illness, his work commitments changed at the last minute or he encountered traffic problems getting to the match.

Facts & Stats

Undeterred, HMRC then tried a few pops at goal from distance.

First, it argued that, as the relevant authorities had all involved overarching contracts, the principles as to what is necessary to establish mutuality of obligation that’s sufficient to found an employment relationship did not apply to the individual contract.

That effort sailed well wide of the post, the Upper Tribunal holding that the principles are indeed of general application.

Second, HMRC argued that the FTT’s conclusion as to an absence of mutual obligations was inconsistent with its finding that there were legally binding contracts. If Professional Game and the referee were entitled to withdraw from each individual engagement after the referee had accepted it, then there was no contract at all.

High and wide. There was no doubt that Professional Game had an obligation to pay the referee if the referee officiated at a match. That was enough to create a contract, albeit a unilateral one. But not one which contained sufficient mutuality of obligation for an employment contract.

There were further shots on goal from HMRC but they were either off target or resulted in fairly comfortable saves for the keeper.

Even if the FTT was wrong to conclude that there was an absence of necessary obligation on the referees, it had been entitled to conclude that the absence of the required obligation on Professional Game meant there was an insufficient mutuality of obligations for the individual contracts to be employment contracts.

Finally, Professional Game’s acceptance that the National Group referees were ‘workers’ under section 230(3) ERA 1996 – so the fans were right after all! – was not something that the FTT had failed to properly consider. The Upper Tribunal rejected the contention that the necessary mutuality of obligation required for a contract of service is the same as that required for an individual to be a worker.

So Ground 1 also failed. And as HMRC had failed to overturn the FTT’s decision on the absence of the necessary mutuality of obligations in either Ground 1 or 3, Professional Game found themselves with an unassailable lead. A golden goal if you will.

Control and pass

A vital goal indeed because there was more than a hint of offside raised by Ground 2 regarding the FTT’s decision on the question of control in the individual contracts.

However, in light of the Upper Tribunal’s conclusion on the lack of mutuality of obligation, it was not necessary either to remit the case to the FTT or for the Upper Tribunal to decide the issue itself. VAR not needed.

The people on the pitch think it’s all over! It is now! Appeal dismissed.

Two-nil to Professional Game Match Officials.

A high-tempo, end-to-end match then. And an exciting one for the neutral fan with some interesting passages of play.

But is it any real surprise that those involved with enforcing the Laws of the Game would be proved right come the final whistle?

Coming up:  B v Yodel Delivery Network Ltd

Extended highlights of the latest gig-economy employment status showdown in the European league Court of Justice.

Simon Emslie