EXCHEQUER SOLUTIONS LTD v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2024] UKUT 00025 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | JUDGE SWAMI RAGHAVAN,THE CHANCELLOR |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 25 January 2024 |
Neutral Citation: [2024] UKUT 00025 (TCC) Case Number: UT/2022/000106
UPPER TRIBUNAL
(Tax and Chancery Chamber) Rolls Building, London
PAYE & NIC – travel and subsistence expenses paid by umbrella company servicing
construction industry clients– whether mutuality of obligation to constitute overarching
contract of employment or whether arrangement amounted to series of individual assignments
in which case travel expenses not allowable as ordinary commuting expenses – FTT correct to
find no overarching contract of employment – FTT also correct to reject appellant’s argument
that Regulation 80 Income Tax (Pay as You Earn) Regulations 2003 invalid and that
reimbursement of expenses were not subject to NICs – appeal dismissed
Heard on: 14,15 and 16 November 2023
Judgment date: 24 January 2024
Before
THE CHANCELLOR
JUDGE SWAMI RAGHAVAN
Between
EXCHEQUER SOLUTIONS LTD Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Giles Goodfellow KC and Philippe Freund, Counsel, instructed by
Fieldfisher LLP
For the Respondents: Adam Tolley KC and Sadiya Choudhury, Counsel, instructed by the
General Counsel and Solicitor to His Majesty’s Revenue and Customs
1
DECISION
INTRODUCTION
1. This is an appeal against a decision of the First-tier Tribunal (Tax Chamber) (“FTT”)
published as Exchequer Solutions Limited v HMRC [2022] UKFTT 181 (TC) (“FTT
Decision”) concerning whether Exchequer Solutions Limited (“ESL”) could deduct
reimbursement of travel expense payments to its employees for the purposes of income tax
(PAYE) and National Insurance Contributions (“NICs”).
2. ESL is a so-called umbrella company servicing the construction sector. It contracts with
construction sector employment agencies (who match individuals to specific construction work
assignments with end user clients) agreeing to take on the role of employer of the individuals
undertaking the assignments; a role neither the end user client nor employment agency wish to
take on. The parties agree that ESL is the relevant individual’s employer during the period of
the construction assignment. The contested issue is whether there is an overarching contract of
employment which also covers the gaps in between the assignments (“the overarching
contract” issue). That issue affects ESL’s ability to deduct travel reimbursement expense
payments. If there is such an overarching employment contract, the different assignment
locations are temporary work locations with the result that ESL is not liable to PAYE and NICs
on its reimbursement of travel from the employee’s home to their place of work. However, if
ESL is only the employer during the period(s) of assignment, each place of work is a permanent
place of work in respect of each separate assignment. The reimbursement of travel expenses is
then disallowed because the expenses are ordinary home to work commuting expenses. Under
the common law, for there to be a contract of employment, there needs to be some form of
“mutuality of obligation” between the putative employer and employee. The FTT agreed with
HMRC that the required mutuality of obligation was missing. It therefore decided, in HMRC’s
favour, that there was no overarching contract of employment.
3. The decisions HMRC made in respect of income tax on the disputed payments took the
form of determinations made under the relevant PAYE legislation (Regulation 80
determinations). ESL argued these were invalid because they had failed to comply with the
requirement in the Regulation to specify the employees or class of employees in respect of
whose earnings the Regulation applied (“the Regulation 80 validity” issue), but the FTT
disagreed. The FTT also rejected ESL’s argument that, the reimbursement payments, even if
they were non-deductible for income tax purposes, were not “earnings” for NICS purposes
(because, so ESL argued, of the different way that term was understood under the relevant legal
provisions) (“the NICs earnings” issue). It accordingly dismissed ESL’s appeal. With the
permission of the FTT, ESL appeals against the FTT’s decision on the overarching contract
issue, the Regulation 80 validity issue and the NICs earnings issue.
BACKGROUND LAW AND FTT DECISION
4. We address the overarching contract issue first. It is helpful at the outset to locate the
provisions in the tax and NICs legislation on travel expense reimbursement which give cause
to examine the common law principles on whether a contract of employment exists.
5. As regards tax, s338 Income Tax (Earnings and Pensions Act) 2003 (“ITEPA”) allows
travel expense deduction but not for the ordinary expenses of commuting (s338(2) ITEPA)
(travelling between home and a permanent workplace – or, in the terms of the legislation a
workplace which is not a temporary workplace).
6. Section 339 ITEPA sets out the meaning of a workplace which is not regarded as
temporary if:
“(5) the employee’s attendance is -
To continue reading
Request your trial