IR35 has been a challenge for businesses for years, and a recent tribunal case involving football referees shows just how difficult it can be to get right in practice.
HMRC argued that referees working in the English Football League should be treated as employees, meaning PAYE tax and National Insurance should apply. The tribunal disagreed, finding they were not employees for tax purposes. The principles apply to any business that uses freelancers, consultants or contractors.
In simple terms, IR35 is about whether someone is genuinely self-employed, or effectively working as an employee but through a limited company. If the working relationship resembles employment, HMRC may expect the income to be taxed as employment income. That can create tax risk not just for the individual, but often for the business as well.
There is no single rule that decides this. Instead, HMRC and tribunals look at the overall relationship and how it works.
In the referee’s case, HMRC pointed to the structure around the role and the oversight involved. However, the tribunal found this wasn’t enough. Being part of an organised system does not automatically make someone an employee.
More important was the lack of any ongoing commitment between the parties. Referees could turn down matches, and there was no guarantee they would be offered work. That absence of obligation on both sides was a key reason the tribunal ruled against a finding of employment status.
The tribunal also stepped back and looked at the full picture, including how the relationship worked day to day and how independent the referees really were. This broader approach is typical in IR35 decisions.
This case reflects a wider reality. IR35 is rarely clear-cut, and outcomes depend heavily on the specific circumstances.
Flexible, project-based arrangements can fall outside IR35 where they are genuinely set up that way. If someone can choose whether to take on work and there is no expectation of ongoing engagement, the position is usually stronger.
Many businesses increase their risk without realising it. Contractors are often treated like employees in practice. They may work regular hours, be part of internal teams, and be expected to remain available over long periods.
When that happens, the relationship can start to look like employment, even if the contract says otherwise.
Sean Farnell, Partner at Burgis & Bullock comments: “IR35 is rarely straightforward. Businesses often rely on contracts, but tribunals look at what happens in practice. If there is an expectation of ongoing work or a high level of control, the risk increases.
“Another key point is that HMRC continues to struggle where arrangements are genuinely flexible. Modern ways of working don’t always fit neatly into traditional employment definitions.”
The key message is not to assume you are compliant.
Take a step back and look at how your contractor arrangements work. Consider whether individuals can genuinely turn down work, whether there is an expectation they will continue working with you, and how much control you have over how they carry out their work.
It is also important that your contracts reflect the true nature of the relationship. If there is a gap between what is written down and what happens, that is where risk sits. This case is not really about football referees. It is a reminder that IR35 is nuanced, fact-specific and still evolving.
Getting it wrong can be costly, but many businesses assume they are compliant without properly testing their position. Taking the time to review your arrangements now is far more effective than dealing with an HMRC challenge later.
For further information, please contact your local Burgis & Bullock office www.burgisbullock.com/contact-us
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