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The recent Court of Appeal decision in Revenue & Customs Commissioners v Professional Game Match Officials Limited (‘PGMOL’) has led to much debate about whether the result is a ‘win’ for HMRC’s much lauded ‘Check Employment Status’ (‘CEST’) tool, or if it has taken a significant blow. Katie Harris, Associate Solicitor, tells us more.

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When the new IR35 rules in the private sector were announced, HMRC promised a much needed upgrade to its CEST tool to provide businesses and those operating as self-employed contractors an easily accessible and reliable way of assessing their employment status.  However, the tool has been heavily criticised for assuming that a key aspect of the employment status test – mutuality of obligation – is automatically present in every engagement.

The PGMOL case considered the question of whether referees, required to provide their personal service to PGMOL, should be considered employees for tax purposes in circumstances where there was no obligation on them to accept matches, and no obligation on PGMOL to offer them.  Crucially, even once a match was offered and accepted by a referee; both the referee and PGMOL could withdraw from the match at any time before kick-off.

Both the First Tier and Upper Tier tribunals agreed that the ability of PGMOL and referees to withdraw from a match after it had been accepted, but before the game started, meant that there was insufficient ‘mutuality of obligation’ for employment status to exist. 

HMRC appealed to the Court of Appeal on the basis that when a referee performed, and was paid for, a match there was sufficient mutuality of obligation in relation to that individual engagement – the fact that either side could cancel the engagement before the match commenced was irrelevant.  In other words, HMRC’s position was that the question of mutuality of obligation only goes to whether a contract exists at all – an assumption which has been built into the CEST tool. 

PGMOL, on the other hand, disagreed.  It argued that mutuality of obligation in the employment context had to mean something more – an obligation to offer work or payment in lieu of it, and an obligation to accept it if offered. 

In its Judgment, the Court of Appeal indicated that it preferred HMRC’s argument – and at first glance a win for CEST and HMRC.  However, the case has been remitted back to the Upper Tribunal for a re-hearing to determine “whether there was sufficient mutuality of obligation and control in the individual contracts to be contracts of employment”.  This wording has led many to believe that HMRC’s position is ultimately wrong, and that mutuality of obligation does require something more than the mere existence of a contract. 

In short, those hoping for some much needed clarity on this tricky issue will have to wait until the case is re-heard by the Upper Tribunal to see which direction they take.  However, what is clear from the Judgment is that each case turns on its own facts, and it is essential to make a decision on employment status based on a total view of the whole picture – no single fact will be determinative.

If the Upper Tribunal ultimately finds that there is no mutuality of obligation then this will be a huge blow for HMRC and its CEST tool – which is already perceived to be unreliable.  Many believe such a decision may result in thousands of contractors who had their status determined by CEST challenging their determinations.

Alternatively if the Upper Tribunal follows the direction the Court of Appeal appears to have taken and finds in favour of HMRC (which may be likely), it will mean that mutuality of obligation is of far less importance in cases where contractors are required to provide their services personally, and other factors such as control and whether they are operating as a business on their own account will be of much greater importance when determining employment status for tax purposes.   A win for HMRC and CEST?  Possibly, but as each case will remain fact specific businesses are advised not to rely solely on CEST when carrying out their status determinations. 

Boyes Turner have experience advising both businesses and individual contractors on their IR35 and employment status compliance, including assistance determining employment status, carrying out Status Determination Statements, training on completing an SDS, dealing with challenges and advice on the process. If you or your business would like any assistance please get in touch via [email protected]

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.


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If you have any questions relating to this article or have any Employment legal matter you would like to discuss, please contact the Employment team on [email protected]

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