In a significant ruling that could have implications for employment status determinations, particularly for IR35, the Supreme Court has upheld HMRC’s controversial interpretation of mutuality of obligation (MOO) and control in its decision regarding referees working under contracts with the Professional Game Match Officials Limited (PGMOL). This ruling not only solidifies HMRC’s position on these key elements but also raises important questions about the broader framework of status determinations. Here’s a breakdown of the case and its wider implications.
Background of the Case
The dispute dates back to 2018 when HMRC challenged PGMOL’s assertion that its football referees were self-employed, arguing instead that they should be classified as employees under employment law. The case has moved through various courts, including the First-Tier Tribunal (FTT), the Upper Tribunal, and the Court of Appeal, before finally being heard by the Supreme Court in June 2023. Each court grappled with the complex issues surrounding MOO and control—two of the most critical tests used to determine employment status, particularly in IR35 cases.
The Supreme Court’s findings
The Supreme Court has found that both sufficient control and more notably, MOO, existed within the individual contracts – from the time referees accepted their match appointments, (even though both PGMOL and the referees had the right to cancel engagements before match day), during the match itself and until the submission of the match report. This aligns with and so upholds HMRC’s controversial interpretation that the existence of a contract is sufficient to satisfy MOO for the duration of that engagement.
On control – although the referees operate independently during the match itself (and it being acknowledged by the court that there was little to no scope for intervention), PGMOL exercised enough control over their general conduct, including imposing penalties and providing coaching and assessments. This satisfied the test with a sufficient framework of control, even though direct supervision wasn’t feasible during matches.
Another case remitted back to the FTT for a re-hearing
While the Supreme Court’s decision firmly supports HMRC’s interpretation of MOO and control, Lord Richards was clear that these elements alone are not determinative of the referee’s employment status, and so has remitted the case to be re-heard by the FTT where they will consider these findings in light of the overall relationship. Lord Richards stated that courts tend to focus too heavily on MOO and control in isolation, emphasising the importance of considering the whole picture when deciding status, as in the Atholl House case – the approach of which the FTT has been directed to apply in its re-hearing.
determinations under IR35 must always take into account the “whole picture”, not just isolated elements. The Supreme Court’s ruling sends a clear message that relying solely on a lack of control or MOO will not suffice to demonstrate a position of self-employment, and these factors should always be assessed in conjunction with other aspects of the working relationship.
Potential Changes to CEST
We are still awaiting the second phase of updates to HMRC’s Check Employment Status for Tax (CEST) tool, which have likely been delayed pending the outcome of this case. While this ruling now confirms that CEST correctly assumes MOO is present when a contract exists, it could prompt some refinements, particularly around how control is evaluated. The Court’s detailed exploration of control, and its view that it can exist through broader frameworks without direct intervention, may lead to changes in how CEST approaches this critical test.
Conclusion
This ruling highlights the complexity of employment status and IR35 determinations, particularly when considering IR35 and the Off-Payroll Working rules. The precedent on MOO is now clearer, but it has taken six years and four courts to get to this point, and we still have yet another hearing before a final outcome is reached. This drawn-out process serves as a harsh reminder that determining employment status can be both complicated and time-consuming. Businesses and contractors should be prepared to consider all aspects of the working relationship when assessing their IR35 status, and accept that where a contract exists, the test of MOO is probably satisfied – meaning other areas would need to be even stronger in support of a self-employed position.
