Back in 2018 HMRC decided to amend the self employed status of a specific group of football referees, primarily from Leagues 1 and 2 and class them as a ‘Professional Game Match Officials Limited’ (PGMOL) employees. The decision meant that Income Tax and National Insurance payments of more than £500,000 were now due for the tax years 2014/15 and 2015/16. PGMOL has successfully appealed to the first tier tribunal in August 2018, when the judges dismissed HMRC’s decision due to lack of control and insufficient mutuality of obligation between PGMOL and the referees the organisation is in contract with.
Since then the case moved on to a second, upper tribunal appeal by HMRC which was finally dismissed last Tuesday (May 6th), when The judges, Justice Zacaroli and Thomas Scott concluded that the contractual agreements in question were in fact outside the scope of IR35, thus HMRC was wrong to consider referees as PGMOL employees. The judges did not accept the FTT ruling regarding the level of contractual control but reaffirmed the tribunal decision, that there was insufficient mutuality of obligation element (MOO) in both personal and overarching contracts.
we do not accept that a contract which provides merely that a worker will be paid for such work as he or she performs contains the necessary mutuality of obligation to render it a contract of service: the worker is not under an obligation to do any work and the counterparty is not under an obligation either to make any work available or to provide any form of valuable consideration in lieu of work being available.
— Justice Zacaroli —
What does this mean for CEST?
Moo is not currently included in the Check Employment Status for Tax tool (CEST):
Contractors, Accountants and Campaigners have long argued that a lack of Mutality of Obligation (MOO) is an important factor when considering the IR35 status. It is not currently included in the CEST tool, a form which HMRC say should be used to determine the status. This ruling adds further weight to the importance of MOO and will ask further questions about HMRC’s view that ‘It is assumed that a person using CEST will have established MOO, which is necessary for a contract to exist.’ This opinion has been repeatedly rebutted by case law and tribunals since before CEST was released.
There are additional factors that can support the principal tests, such as:
- Requirement to maintain adequate business insurance throughout the contract.
- A responsibility for repairing defect work at your own cost and in your own time.
- A responsibility for providing training and equipment in relation to the services provided.
What about IR35 assessments?
Though we recommend that when operating outside of IR35 you have a number of clauses and actual working practices to support your status, (such as adequate control over the method of performance of the services and the ability to substitute), this ruling could be used to strengthen any defence with regards to lack of mutuality of obligation. Though HMRC are intent on ignoring MOO, if the CEST tool is updated to include this, you should re-evaluate (or ask your client to re-evaluate it) your contract as soon as possible, on that basis.
Get further IR35 advice
If you have further questions in regards to your current or future contract status, we can advise about the next best step for you. our teams of experienced accountants are ready to help you get some clarity and make the right decision for your business.
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