07 Jun 2020

HMRC caught offside

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It is usually a game of two halves, but in Professional Game Match Officials v HMRC [2020] UKUT 0147, HMRC were not able to win either half and at the final whistle in this case, the result was clear: Taxpayer 2 vs HMRC 0.

The result was great for the taxpayer but what will please the fans more is the way in which the taxpayer beat the opposition.

Professional Game Match Officials Limited (PGMOL) provide referees to the Premier League, FA Cup, and EFL and pays some of them on a self-employed basis. HMRC challenged this and believed the referees should have been subject to PAYE (a common challenge made by HMRC if they start any enquiry into companies that pay self-employed workers).

The case initially went to the First-tier Tax Tribunal and PGMOL won the case. HMRC then appealed the decision and in 2020 the Upper-tier Tax Tribunal agreed with the previous decision and HMRC lost.

This is an important judgment for a few reasons. The first is that the First-tier Tribunal judgments are not binding and so do not carry much weight in other cases. A judgment however, from an Upper-tier Tribunal is binding on the first-tier and so this case will carry weight in other cases and can be relied upon.

The part of this case that is of real importance is that the appeal largely centred on an area called mutuality of obligation. This has been a problem area in employment status for 60 years and there have been very few judgments that define clearly what this phrase means along with its importance for tax status cases. It is therefore welcome to get a judgment that confirms what taxpayers have been arguing for years (which has fallen on deaf ears with HMRC).

This is that an employment relationship must have mutuality of obligation and mutuality of obligation is the obligation on the company to offer work to the individual and a reciprocal obligation from the individual to carry out work. If this is absent from the working relationship, it cannot be one of employment.

The importance of this should not be underestimated. HMRC will no doubt argue that this was a unique case and whilst the facts may be unique, the principles set out in relation to mutuality are crystal clear.

Employment status is a complicated area of tax and can cause all sorts of problems if HMRC show an interest in your business. Marble can remove this area of risk from your business completely. We are run by tax experts and have a clean bill of health with HMRC as we have had VAT and status enquiries in 2019 both of which were closed without issue.