The recent final decision of the First-Tier Tribunal regarding the employment status of football referees engaged by Professional Game Match Officials Ltd (PGMOL), has highlighted again that determining whether someone is an employee or a contractor is complex and often misunderstood. Misclassification can lead to significant financial and compliance risks.  

Common indicators of being a contractor include substitution rights, autonomy, financial risk, multiple clients, and project-based payment structures. Whereas indicators of employment include control, integration and ongoing obligations. However, what the PGMOL case brought to light is that control and mutuality of obligation should not be viewed in isolation. Mutuality of obligation exists where the engager is contractually obliged to provide work and the worker is contractually obliged to accept and perform the work themselves.  

PGMOL 

In the PGMOL case, match officials were provided by PGMOL for professional football matches in England. In most cases, especially for Premier League matches, the officials provided were full-time employees of PGMOL. However, the Championship also used officials who were treated as self-employed contractors and, in most cases, had full time work elsewhere during the week and only provided services at weekends. These officials signed up for a football season and, although there was no obligation to accept any offer of work, in practice work would be offered and accepted regularly.

This case, which was eventually found in favour of PGMOL, was particularly complex but even in simpler employment status situations, there are many misconceptions as to how status is determined.

Common Misconceptions

Misconception 1: If they have a contract for services, they’re a contractor

Contracts alone do not determine status. The actual working relationship is key. If someone’s working relationship seems more akin to that of an employee, in practice, they may need to be treated as one for tax purposes regardless of the written terms. 

Misconception 2: Contractors are self-employed elsewhere, so they must be self-employed for us

Each engagement must be assessed individually. A worker may be self-employed in one role but employed in another depending on working practices, just as an employee can have more than one employment.

Misconception 3: Contractors handle their own tax, so we’re covered

Under the off-payroll working rules (IR35), responsibility may sit with the engager to assess status and account for tax and National Insurance.

Misconception 4: Short-term work means contractor status

The length of an engagement is not a decisive factor in determining status. Control, integration and autonomy matter more.

Misconception 5: Invoicing proves self-employment/contractor status

The payment method does not determine status. Authorities assess substitution, supervision and mutual obligations. A worker may have a right to send a substitute per the contract, but if that could not operate in practice then it will be less persuasive in reality.

Misconception 6: Status never changes

Status can shift over time as working arrangements evolve.

What is IR35?

The off-payroll working rules (also known as IR35 rules) ensure that workers operating through intermediaries, such as personal companies, pay the appropriate tax where the relationship resembles employment.

Organisations engaging workers must assess whether the worker would be an employee if engaged directly. Medium and large organisations and public authorities must issue a Status Determination Statement and maintain accurate records. If the worker is held to be inside the off-payroll working rules, the fee-payer (broadly the person paying the worker’s intermediary) must calculate the relevant taxable figure, deduct tax and National Insurance contributions (NICs) as if the worker was an employee and pay employer NICs and Apprenticeship Levy. 

Small private sector organisations are not responsible for making IR35 determinations for tax purposes; this responsibility remains with the worker’s intermediary. However, small organisations must still consider employment status carefully in other contexts, including employment rights and general compliance. Relying solely on size exemptions can create risk if arrangements are not genuinely self-employed/contractor in practice. in practice.

Using HMRC’s CEST Tool

HMRC’s Check Employment Status for Tax (CEST) tool helps organisations assess the employment status of their workers. Results depend on accurate inputs and should reflect actual working practices. CEST tool determinations should be retained in case of future query by HMRC. HMRC states that they will stand by all results given by the tool, as long as the information provided while using the tool is accurate, complete and in line with HMRC guidance.

What should employers do?

Employers should review arrangements regularly, assess engagements individually, document decisions, train managers - especially those who recruit - and ensure working practices align with determinations. Incorrect determinations can lead to tax liabilities, penalties, reputational risk and employment claims.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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