Gary Lineker on the referee’s decision that may affect self-employed people

Tax authorities have warned self-employed workers to prepare for an upcoming crackdown. This could result in more inquiries into their earnings.

The Supreme Court dismissed last week an appeal filed by the football referees body regarding a £584,000 tax due on employment.

Professional Game Match Officials Limited, or PGMOL, provides referees to all Premier League, English Football League, and Football Association competitions including the FA Cup. PGMOL said that some referees were full-time permanent employees while others “refereee in their free time and have other full-time occupations or employments,” PGMOL stated.

The six-year-old case centres around the employment status for 60 referees that worked for PGMOL during the 2014-15 and the 2015-16 tax year. HM Revenue & Customs issued PGMOL a £584,000 invoice, claiming that the referees were employees and not independent contractors and should therefore have been paid.

Gary Lineker has won his tax dispute after HMRC accused of him being a disguised worker.

The tax office stated that income tax and contributions to national insurance should have been taken out of their pay rather than letting them manage their own tax affairs.

PGMOL challenged the bill in 2018. The case was first heard by the First-tier Tribunal, and then ended up at the Supreme Court of Canada in June 2023. The Supreme Court issued its judgment last week. It ruled in favor of HMRC but did not make a final ruling. Instead, it sent the case down to a lower tribunal for reconsideration.

Waqar Shaqar from the law firm Kingsley Napley stated that HMRC can use the court decision to “ramp-up inquiries” against freelancers and the businesses who employ them in order to raise additional tax revenue. Andrew Chamberlain, from the Association of Independent Professionals and the Self-Employed (a non-profit membership organization), said: “Simply said, this ruling will make it harder for self-employed people to work.

“HMRC is under pressure from the courts to help close the tax gap. It may feel emboldened by this to crackdown on the self-employed.” This case was just the latest in an ongoing series of hearings on employment status, as HMRC pursued celebrities and TV personalities over unpaid taxes. All of these cases stem from a set of complex off-payroll rules, known as IR35 (by HMRC), that ensures workers who provide services through an intermediary company pay the same amount in income tax and national security as employees.

Self-employed workers can save money by not being on the payroll. To reduce their tax bill, freelancers can set up their own company and pay themselves a modest salary. The rest of the income is then paid out in dividends. Dividends are taxed at a lower rate than income. For basic-rate taxpayers, the tax rate is 8.75 percent compared to 20 percent income tax; for higher-rate tax payers it’s 33.75 percent compared to 40 percent; and for additional-rate tax payers it’s 39.35 cents compared to 45 cents.

Employing self-employed employees can help companies avoid paying for employer national insurance contributions, holiday pay and pension contributions.

It can be difficult to determine a worker’s employment status because the law does not define what an employee is. The legal battles between HMRC and workers have been a result of this.

HMRC has pursued TV personalities such as Gary Lineker and Adrian Chiles who do not work on a regular payroll but get the majority of their income and work from a single organisation or program, for tax because they believe that they should be treated like regular employees.

Lineker was able to win his tax dispute in March of last year after HMRC accused Lineker of being a disguised worker for his work at BBC and BT Sport.

Kelly won her court case in 2019 over a £1.2million bill. The judge ruled she was not an ITV employee but a “self employed star”.

Chiles’s legal battle against HMRC for five years over a tax bill of £1.7 million is still ongoing. In June, his case was sent to the first-tier Tribunal to be reviewed once more.

The Supreme Court in the PGMOL case said that it was satisfied two of three conditions required to establish an employment relation for tax purposes were met. The court found evidence of “mutuality” of obligation to perform and provide work and of a degree control over referees.

The case is not yet over. Because the court did not reach a definitive decision about whether or no the referees are employees, the case was sent back to the tribunal of first instance to be heard once more. The date is not yet set, but it’s unlikely to be in this year. David Klass, a lawyer at Hill Dickinson, said that the decision of the court about the contract may make it more difficult for people who are self-employed to find work.

He said that there is a chance it could influence companies to be cautious and less willing to work with self-employed people. The gap between tax due and paid could be reduced by having more employees on payroll. Their taxes would automatically be deducted. Tax office estimates that the tax gap in 2022-23 was 4.8% — or about £40 billion.

In its manifesto Labour promised to give HMRC £855 millions a year in order to crackdown on tax evasion. By the end of this Parliament, it is estimated that this will raise net £5 billion per year.

Shah stated that HMRC should investigate this area and try to recover more tax. Now more than ever before, companies must check the agreements that they have with freelancers.

Kaye Adams, a woman who has won her case against HMRC, claims that this ruling will cause more confusion

Kaye Adams is a self-employed businesswoman who worked as a presenter for Loose Woman at ITV. HMRC took her to court three times but she won, the most recent in January. She argued that she was self employed when she presented BBC Radio Scotland during the 2010s.

Adams commented on the PGMOL decision, saying: “What this judgement means for self employed workers is more confusion.” The Supreme Court has sent this case back to a first-tier tribunal for a decision after ten years. This means that the case is now in the same limbo it’s been stuck in for the past decade. If this legislation is difficult to understand and implement, it would be better to redraw it rather than continue to wrangle over the issue at the expense hard-working citizens.”

Matt Crawford, a tax advisor at Blick Rothenberg, said that those freelancers who have been caught in IR35 cases might now feel inclined to pay their unpaid taxes with HMRC.

Two or three years ago HMRC lost more cases than they won, but that trend has now reversed. He said that those who are involved in a dispute with HMRC or have a case before a tribunal at the first level may settle, knowing they will likely win.

HMRC stated: “The judgment confirms our long held position on employment law and does not change anything, therefore we do not plan to increase investigations in response to this judgement.”