HMRC have suffered a major blow in their ongoing campaign to treat increasing numbers of individuals as employees: rather than self-employed. In the latest “Status Dispute” case to hit the courts, the Upper Tier Tax Tribunal has decided that Level 1 National Group football referees are self-employed.
HM Revenue and Customs asserted that Level 1 National Group football referees should be treated as employees of Professional Game Match Officials Limited; rather than being able to continue their self-employed status. As usual in so-called “Status Dispute” cases, the key issue was to decide whether the referees were working under a “contract of service” (in which case they would be employees) or were, instead, working under a “contract for services” (in which case they would be self-employed). And a key issue in deciding between the two alternatives is what is known as “Mutuality Of Obligation” (“MOO”). In recent years the taxman has been claiming that MOO only helps determine if there are contractual arrangements in the first place: and if there are, that secondly those arrangements require work-related personal service in some way. But the taxman has asserted that the MOO test is not by itself determinative of employment status.
HMRC lost their case at the First-Tier Tribunal, and now on appeal The Upper Tier Tribunal (“UTT”) confirmed that HMRC were wrong about the Mutuality Of Obligation test: and that the referees are self-employed.
The Upper Tier Tribunal Findings
Crucially the UTT rejected HMRC’s contention that the issue of Mutuality Of Obligation is not a key indicator of employment. The judge decided that MOO has a dual purpose. Firstly, to determine whether a contract exists at all, but secondly it can also determine whether that contract is one of employment. The Tribunal held that there are three propositions necessary to create a contract of employment. The employee must have a minimum obligation to perform at least some work, and to do so personally. The employer must be under an obligation to provide at least some work, or some form of recompense when work is not available. And finally, both these obligations must run for the life of the contract.
Applying those principles to the referees, the Tribunal judge determined that there was insufficient MOO for an employment contract to exist; and so the referees had correctly been treated as self-employed.
Lynam Tax Comment
Along with a number of other recent cases, HMRC’s long-standing attempt to ignore the principle of Mutuality Of Obligation when considering self-employment Status issues appears not to be sustainable any longer.
What does this mean for me?
If you or your business have been challenged by HMRC in relation to employment status issues, then the decision in this case is generally encouraging. It offers yet further support to challenge HMRC’s contentions. However, the question of employment Status is a hot topic with HMRC at the moment, and they are continuing to challenge an increasing number of situations. In this instance, they were not prepared to negotiate an outcome and took the matter to the First Tier Tribunal. Having lost there, HMRC did not give up – and took the appeal to the Upper Tier Tribunal. HMRC are showing little sign of giving up on this issue.
How can Lynam Tax Enquiry Experts Help Me?
The Lynam Tax Specialists have a huge amount of experience of employment status cases. We have successfully defended clients over the years from such challenges. HMRC use specialists in status disputes. You need a specialist in your corner.
For a confidential and free initial discussion phone the experts now:
Paul Lynam: 0845 643 9997
Andrew Nutbrown: 0771 877 8710