Upper Tribunal Tax and Chancery Chamber

UT/2020/000377 - [2024] UKUT 00099 (TCC)

Fecha: 15-Dic-2023

Relevant case law

Relevant case law

68.

We have been referred by the parties to various authorities on the application of the first limb of the RMC test including (amongst others): Kickabout Productions Limited v. HMRC [2020] UKUT 216 (TCC) (“Kickabout UT”); Kickabout CA; Quashie; HMRC v Larkstar Data [2008] EWHC 3824 (Ch). However, the judgment of Elisabeth Laing LJ in PGMOL contains a comprehensive summary of much of the relevant case law and we will refer primarily to that judgment.

69.

PGMOL concerned the tax treatment of referees of professional football matches. The referees were engaged by the taxpayer company to officiate at football matches. They were appointed annually before the start of each football season. The company appointed the referees to officiate at matches at the start of each week. The referees could accept or reject the appointments that they were offered. The company could cancel any appointments that were made. The referees were paid fees and expenses for each match they officiated. They were not treated as employees by the company.

70.

The FTT and the Upper Tribunal found that the referees were not engaged under contracts of employment. On appeal by HMRC, the Court of Appeal found that the FTT and the Upper Tribunal had erred in their approaches to mutuality of obligation. The fact that there was insufficient mutuality of obligation in the overarching contract between the referees and the company did not prevent the engagement for each match from being a contract of employment.

71.

Elisabeth Laing LJ (who gave the leading judgment) undertook a comprehensive review of the case law, with a particular emphasis on those cases where a worker is engaged intermittently by a putative employer. She stressed the need to distinguish in any review of the case law between cases where there is a need to show continuity of employment – and so that an employment relationship exists at times in between the times at which the worker is actually working on an engagement – and those where continuity of employment is not in issue and it is only necessary to show that the individual engagements involve an employment relationship (PGMOL [48]).

72.

Her main conclusions are set out at PGMOL [118] and [119]:

118.

McMeechan, Clark, Carmichael and Prater (Footnote: ³), which bind this Court, are all cases in which this Court considered, in one way or another, the relationship between mutuality of obligation in an overarching contract and in a single engagement. They establish at least three propositions.

The question whether a single engagement gives rise to a contract of employment is not resolved by a decision that the overarching contract does not give rise to a contract of employment.

ii.

In particular, the fact that there is no obligation under the overarching contract to offer, or to do, work (if offered) (or that there are clauses expressly negativing such obligations) does not decide that the single engagement cannot be a contract of employment. The nature of each contract is a distinct question.

iii.

A single engagement can give rise to a contract of employment if work which has in fact been offered is in fact done for payment.

119.

Those authorities do not support any suggestion that the criterion of mutuality of obligation is the sole, qualifying test for the existence of a contract of employment, so that if there is some mutuality, but it is not the right kind of mutuality, there can be no contract of employment. On the contrary, those authorities, and the other authorities to which we were referred, suggest that the court has to look at all the circumstances in the round before deciding whether or not there is a contract of employment. The Court of Appeal in McMeechan specifically rejected a submission to that effect by the Secretary of State. The Court of Appeal in Prater rejected similar submissions by the appellant council in that case.

73.

The key principles that we take from PGMOL and the case law to which Elisabeth Laing LJ refers in her judgment for the purposes of this decision are as follows:

(1)

Mutuality of obligation is not a test of employment status. It is an element of the test. If it is met the court or tribunal has to proceed to the other aspects of the test and look at all the circumstances in order to determine if a contract of employment exists (PGMOL [119]).

(2)

An individual engagement can involve mutuality of obligation if work which has been offered is in fact done for payment – and may give rise to a contract of employment if the other elements of the test are met (PGMOL [118(3)]). In order to meet the mutuality of obligation requirements in the first limb of the RMC test, it is sufficient for there to be mutuality of work-related obligation in relation to the individual engagements (Quashie [12] – [14]).

(3)

For the purposes of meeting this requirement alone, it is not relevant that the putative employer is not obliged to offer any further work at the end of each engagement or that the putative employee would not be obliged to accept it (McMeechan v Secretary of State for Employment [1997] ICR 549 page 565, Prater v Cornwall County Council [2006] EWCA Civ 102 (“Prater”) [40(5)], PGMOL [57], [118(1)]).

(4)

The fact that one party may be able to terminate the agreement before any work is done does not negate mutuality of obligation unless the option to terminate is in fact exercised. Unless the option is exercised, the contract subsists with its mutual obligations (PGMOL [68]).

(5)

The authorities do not support a requirement for a degree of mutuality of obligation over and above the mutual obligations existing within the separate contracts for individual engagements (Prater [33], PGMOL [119]).