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Football referees have shown a red card to the taxman after winning a legal battle over a £584,000 penalty charge in a landmark case about the nature of employment.

Professional Game Match Officials Limited (PGMOL), the body that represents football referees in England, successfully argued against HM Revenue & Customs in a recent tax tribunal case that most referees should be considered self-employed and entitled to pay a lower rate of national insurance.

The decision lands a blow against the tax authority, which has been accused of being overzealous in policing the line between those who register themselves as self-employed and those workers and companies who must pay full national insurance contributions.

The ruling sets a precedent for up to 30,000 football referees in England, as well as tens of thousands of individuals officiating other sports.

It also has implications for workers in other fields — including media, medicine and professional services — where rules imposed on them by a regulator may previously have been interpreted as an indication that they are employed. 

“This was a sensible judgment and a fair judgment,” said Mark Groom, employment tax partner at Deloitte who advised PGMOL. 

Jolyon Maugham, the barrister instructed by Deloitte, added: “This is a landmark case for all football referees and all of those umpiring in other sporting codes.”

HMRC challenged the working status of around 60 “level 1 national group” referees who officiate at professional league matches below the English Premier League. They receive match fees typically worth hundreds of pounds, in some cases adding up to an annual income of around £10,000.

The UK tax authority argued these officials should be considered employees of PGMOL, which would have raised the level of national insurance contributions paid on such earnings on behalf of the individuals from 9 per cent to 12 per cent. It also would have placed an obligation on PGMOL to pay 13.8 per cent of those earnings to the tax authority in employers’ national insurance contributions.

HMRC tried to recoup around £584,000 in back taxes from PGMOL for the period between 2014 and 2016 when it claimed that the higher national insurance contributions should have been paid.

PGMOL successfully argued that, unlike in the Premier League, those who officiate in lower division matches are not directly employed. These people have other day jobs and can turn down requests to take charge of matches due to other commitments.

Had HMRC won, the decision would have also affected the 30,000 amateur referees further down the English football pyramid, including grassroots Sunday league matches, and potentially thousands more who oversee other sporting events.

It also could have suppressed future wage increases for the referees, as an adverse ruling would have effectively increased the cost of employing them by nearly 14 per cent.

HMRC said: “We are disappointed that the tribunal has decided that national list level 1 referees are not employees as we do not think this reflects changing practices within the football industry and the way level 1 referees work in the modern game. We are studying the detail of the ruling carefully before deciding on the way forward.”