What do football referees have to do with tax law?
Quite a lot, actually, following the HMRC spat, I mean the court case of HMRC v Professional Game Match Officials Ltd. The case revolved around whether professional football referees were employees of the limited company or self employed individuals who were paid by it.
Long story short, eight years of litigation ended in June 2026 when the referees won their legal case. The court confirmed they were self employed, which is what they’d said from the beginning. HMRC, of course, wanted them to be employees, as this would have meant a considerably larger tax bill for both the referees and for PGMOL as their employer.
What we’ve ended up with now, however, is interesting. Well, it’s interesting for those likely to be affected, and for tax nerds like me.
The three step test (now clarified)
Previous legal cases had identified a three step approach to determining employment status, and HMRC had published guidance on how those steps worked.
This case has set out the same three step plan, but with an important clarification about how the steps interact.
Previously, HMRC’s view was that the first two steps (looking at specific contractual factors) had to be considered separately from the third step (a broader review of all circumstances). And HMRC excluded from the third step anything already covered in steps one and two, which meant the third step was quite limited in scope.
Coincidentally, this approach often gave a result in favour of employment rather than self employment (which meant everyone paid more tax).
What has happened now, however, is that the court has now clarified that the first two steps are there to identify whether the third step is needed. And crucially, the third step is a holistic review of all the circumstances, without any limitations. Nothing is excluded.
This marks a genuine shift in how employment status is assessed.
What happens next?
HMRC will need to lick their wounds and rewrite their guidance. That includes their CEST online status tool, which businesses use to check whether a worker should be treated as employed or self employed.
Tax professionals like me will also need to rethink our approaches in line with the new clarification. Employment status assessments that might previously have come down on the side of employment may now land differently.
Who should be interested?
If you use contractors, freelancers, or any kind of flexible workforce, this should matter to you:
- Businesses that engage subcontractors need to make sure those subcontractors are genuinely independent businesses or self employed. Getting this wrong can mean significant tax bills and penalties.
- Freelancers, particularly those working in the gig economy, may find their employment status easier to defend as genuinely self employed.
- Limited company contractors and off payroll workers affected by IR35 rules should pay close attention. This case may influence how those rules are applied going forward.
Recheck the employment status of your workers
The referees’ victory isn’t just about football; it’s a landmark case that affects how employment status is determined across the board.
For you, this means that if you’ve been uncertain about the status of workers in your business, or if you’ve had an assessment that felt borderline, it may be worth revisiting.
Need help looking at the employment status of your workers? Get in touch for a consultation. |
