HMRC brought a case against 60 ‘level 1 national group’ football referees, saying that their employment status had been wrongly classified. The referees had been paying National Insurance Contributions (NICs) as self employed contractors. The Tax Office maintained that they should have been categorised as employed and therefore paying a higher rate of NICs.

They were represented by Professional Game Match Officials Ltd (PGMOL), the professional organisation for English referees.

How much difference does employment status make to NICs?

In this case, the difference is £584,000. That is the total amount HMRC were claiming from the 60 referees in back tax payments from 2014-16.

To the individual, it means a rise in NICs from 9% to 12% and your employer now also has to pay HMRC ’employer’s NICs’ at 13.8%.

Do referees earn a lot?

Referees working at this level of football are paid per match and earn a maximum of £10,000 per year. So, HMRC aren’t exactly going after the big money here. It is not the same conditions as those who referee in the Premiere League.

Why did HMRC lose this tribunal?

In her conclusion, Judge Sarah Falk said: “…individual appointments to matches were engagements to perform the task of officiating at the match in question for a fee, and not contracts of service.”

The situation for level 1 national group referees and the PGMOL did not demonstrate two essential elements which define employment – control and ‘mutuality of obligation’. In other words, most of these referees have day jobs and can refuse to be at a match due because of other factors.

What are the consequences of this tribunal’s result?

According to PGMOL’s adviser, Mark Groom of Deloitte, “This was a sensible judgment and a fair judgment.” Also recorded in the Financial Times is barrister Joylon Maugham’s comment, “This is a landmark case for all football referees and all of those umpiring in other sporting codes.”

The consequences of HMRC winning this case would have been felt by all football referees from this level down and possibly by the thousands of other individuals who officiate at other sporting events.

Another possible impact may have been on holding back referees’ pay, as they would have suddenly become 13.8% more expensive in employers’ NICs.

It could also be taken as a precedent for other cases where an individual’s employment status is unclear, in any industry.

The Association of Independent Professionals and the Self Employed’s (IPSE) Deputy Director of Policy, Andy Chamberlain said:

“This comes on the back of HMRC having lost three out of four cases in the tax tribunal which have also turned on a misunderstanding of key employment indicators. What this highlights is that the rules in this area are very complex, and if HMRC are struggling to determine who is employed and who is self-employed, then so too is everyone else.  The best way to address this legal uncertainty is to write into a law a positive definition of self-employment. This would send a clear signal about who is and who isn’t self-employed and would mean that individuals wouldn’t have to rely on the courts to get a resolution.”

Rather predictably, HMRC’s response is: “We are disappointed that the tribunal has decided that national list level 1 referees are not employees as we do not think this reflects changing practices within the football industry and the way level 1 referees work in the modern game. We are studying the detail of the ruling carefully before deciding on the way forward.”