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Brookson Legal Responds to PGMOL vs HMRC: Supreme Court Sends IR35 Case Back to Tribunal

In a crucial decision, the Supreme Court has remitted the long-running case between Professional Game Match Officials Limited (PGMOL) and HM Revenue & Customs (HMRC) back to the Upper Tribunal for further consideration. The case, which centres around the employment status of football referees under the IR35 tax legislation, marks a pivotal moment for businesses engaging independent contractors and highlights the importance of correctly assessing employment status.

Background of the Case

The case began when HMRC challenged the PGMOL regarding the employment status of referees officiating professional football matches. HMRC contended that the referees were employees of PGMOL, making them subject to PAYE tax and National Insurance contributions under IR35 rules, which apply to off-payroll workers.

PGMOL, on the other hand, argued that the referees were self-employed contractors. The organisation maintained that there was no obligation for it to provide work on a continuous basis, nor were referees required to accept every assignment offered to them—key indicators of self-employment.

After several stages in the courts, including a judgment from the Court of Appeal, the Supreme Court has now determined that further investigation is required and has referred the case back to the Upper Tribunal to reassess the employment status of the referees.

Key Issues: Employment Status

The case highlights the ongoing complexities surrounding employment status, which is critical for determining tax liability under IR35 legislation. Employment status in the UK hinges on several factors, including:

  • Mutuality of obligation: Is the employer required to offer work, and is the worker obligated to accept it?
  • Control: To what extent does the business dictate how, when, and where the work is carried out?
  • Personal service: Is the individual required to do the work personally, or can they delegate it to a substitute?

In the PGMOL case, the Supreme Court has requested a fresh look at the mutuality of obligation and control between the referees and PGMOL, which are key indicators for determining whether a worker is truly self-employed or should be classified as an employee.

The Importance of Contractual Terms

The PGMOL vs HMRC case emphasises the importance of carefully drafting contracts and ensuring that they reflect the reality of the working relationship. PGMOL’s contracts identified referees as independent contractors, but HMRC argued that the reality of the working conditions pointed toward employment.

This discrepancy between the written contract and the day-to-day working relationship is a significant issue that businesses must consider. The courts and HMRC increasingly look beyond the terms in a contract to examine how the relationship operates in practice.

A Warning for Businesses: Reassess Your Arrangements

The latest ruling from the Supreme Court is a reminder for businesses to re-evaluate their engagement with contractors, particularly in light of the IR35 rules. Relying on contractual terms alone is no longer sufficient to protect against potential challenges regarding employment status.

Businesses need to:

  • Assess the reality of their working relationships with contractors, beyond what is written in the contract.
  • Review the level of control and mutual obligations present in those relationships.
  • Ensure that contracts are aligned with working practices to mitigate the risk of non-compliance with IR35.

Failure to correctly classify workers can lead to costly tax liabilities and penalties, so a proactive approach to assessing contractor arrangements is essential.

Speak to Brookson Legal

With the complexities of IR35 and employment status continuing to create challenges, it is crucial for businesses to seek expert legal advice. Brookson Legal specialises in helping businesses ensure compliance with IR35 legislation and reviewing contractor relationships to protect against potential disputes.

If your business is concerned about its contracts with contractors or wishes to ensure compliance with the latest IR35 rulings, contact Brookson Legal for expert advice.