HM Revenue & Customs has suffered a major setback in one of the longest-running and most consequential employment status disputes in UK tax history. An arbitration tribunal ruled that 60 football referees employed by the Professional Game Match Officials Limited (PGMOL) were genuinely self-employed and not employees, as the tax authority had claimed for almost a decade.
The decision made by the First Tier Tribunal means HMRC will be denied £584,000 in payroll tax it had claimed it was owed. The department reserves the right to appeal, but the ruling has already been seen by tax experts as a potentially devastating moment for the millions of contractors, freelancers and businesses operating in the UK’s flexible labor market.
Specialist contractor insurance provider Qdos described the result as one of the most significant employment status judgments in history and warned that it exposed a “fundamental flaw” in HMRC’s own Check Employment Status for Tax (CEST) tool, the digital tool launched in 2017 that has been used millions of times to determine whether a worker should be taxed as an employee or as a self-employed person.
The case revolved around two principles that have long been considered the basis of employment jurisprudence: Mutuality of Obligation (MOO), which is the question of whether an employee is obliged to accept the work and the employer who is obliged to provide it, and control, which is the extent to which a company determines the way in which services are provided. The tribunal ruled that arbitrators were neither mutually obliged to work for PGMOL nor were sufficiently controlled in the manner in which they carried out their duties to be classified as employees.
Qdos chief executive Seb Maley said the ruling directly undermined HMRC’s interpretation of the rules it oversees.
“This landmark ruling directly challenges HMRC’s understanding of employment status and exposes a fundamental flaw in the tax office’s employment status tool, which urgently needs an overhaul,” he said.
“For years HMRC has insisted that there are reciprocal obligations in every contract, so much so that their CEST tool barely scratches the surface. The latest twist in this case highlights the need for rigorous scrutiny of CEST, which has been used millions of times to determine individuals’ employment status and therefore whether they pay tax as self-employed or employed.”
Maley added that the finding should reassure companies that hire contractors. “Make no mistake, this result is good news for businesses that engage contractors and the self-employed because ultimately it proves that factors such as reciprocity of obligation and control really are not as close as HMRC have claimed.”
He also took aim at the sheer length of the process. “With the first hearing in 2018, we are almost a decade into this case, the outcome of which could still be appealed. If that doesn’t demonstrate the urgent need to simplify employment status, I don’t know what does. With a government consultation on this issue underway, it is important that judgments like this, which impose huge burdens on people and cost taxpayers an incredible amount, are taken into account.”
A decade in court
The dispute arises from PGMOL’s employment of arbitrators as independent contractors in the 2014/15 and 2015/16 tax years. HMRC opened the first front in 2018, arguing in the First-tier Tribunal that the officers should have been treated as employees as they had a mutual obligation to work for PGMOL.
The FTT disagreed, finding that the reciprocity of obligations was insufficient. HMRC appealed and lost again in 2020 at the High Court, which upheld the original decision that the minimum criteria for employment had not been met.
A further appeal by HMRC took the case to the Court of Appeal in 2022, which overturned the earlier decisions and concluded that there were reciprocal obligations on each match day, and sent the dispute back to the FTT for reconsideration.
PGMOL escalated the matter to the Supreme Court in 2024, where the appeal was dismissed and the case was again referred back to the FTT. At this latest hearing, PGMOL’s position was now finally vindicated, as the judge ruled that the arbitrators were neither under a duty to each other’s work nor sufficiently controlled by PGMOL to be employees.
For the UK SME community, which relies heavily on freelancers and contract workers, the decision is more than a footnote in a niche sporting dispute. It goes to the heart of the way HMRC interprets and enforces the employment status rules it has drafted, further increasing pressure on Whitehall to deliver long-promised simplification of a system that has caused difficulties for businesses, workers and the courts for years.
