MAINPAY LIMITED v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2024] UKUT 00233 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | MR JUSTICE ADAM JOHNSON,JUDGE THOMAS SCOTT on |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 20 August 2024 |
Neutral Citation: [2024] UKUT 00233 (TCC) Case Number: UT/2023/000049
UPPER TRIBUNAL
(Tax and Chancery Chamber) The Royal Courts of Justice,
Rolls Building, London
INCOME TAX – umbrella company engaging temporary workers – reimbursement to workers
of subsistence expenses by reference to scale rates – whether reimbursement payments
deductible – whether each workplace attended by worker was a permanent workplace –
whether contract was an overarching contract of employment or, if not, a single employment
– whether payments using scale rates were deductible without an HMRC dispensation –
establishing whether loss of tax brought about carelessly so that extended time limit for making
an assessment applied
Heard on: 15 and 16 May 2024
Judgment date: 16 August 2024
Before
MR JUSTICE ADAM JOHNSON
JUDGE THOMAS SCOTT
Between
MAINPAY LIMITED Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S
REVENUE AND CUSTOMS Respondents
Representation:
For the Appellant: Michael Firth KC, instructed by The Independent Tax and Forensic
Services LLP
For the Respondents: Sadiya Choudhury KC, instructed by the General Counsel and Solicitor
to His Majesty’s Revenue and Customs
1
DECISION
INTRODUCTION
1. Mainpay Limited (“Mainpay”) appeals against the decision of the First-tier Tribunal
(Tax Chamber) (the “FTT”) released on 21 December 2022 (the “Decision”).
2. Mainpay is an “umbrella” company which engages temporary workers, principally in the
education, health and social care sectors. Mainpay has contracts with employment agencies
which are engaged by end users such as hospitals or schools.
3. Mainpay reimbursed subsistence expenses to workers using round sum or benchmark
scales, and claimed that such reimbursements were deductible from each worker’s earnings for
the purposes of income tax and national insurance contributions (“NICs”). Broadly, such
expenses are not deductible if they are expenses of travel to and from the worker’s “permanent
workplace”. Mainpay took the position that because it engaged the workers on the terms of a
single employment contract, each of the places where a worker carried out an assignment was
a temporary rather than a permanent workplace, so the expenses were not prevented from being
deductible.
4. HMRC disagreed, saying that each workplace was a permanent workplace, and, in any
event, scale rates could not be used without agreeing a dispensation with HMRC. HMRC issued
determinations for PAYE and decision notices for NICs, based on a denial of a deduction for
the reimbursed subsistence expenses. For two of the relevant tax years, the assessments were
validly issued only if any loss of tax could be shown to have been brought about carelessly by
Mainpay.
5. In the Decision, the FTT dismissed Mainpay’s appeal, deciding that the expenses were
not deductible, and for the relevant years the assessments were validly issued.
SUMMARY OF RELEVANT FACTS
6. References below to paragraphs in the form FTT[x] are to paragraphs of the Decision.
7. Mainpay engaged temporary workers who supplied services to end users or clients.
Mainpay did not enter into an agreement directly with the end client. Rather, the client entered
into an agreement with an employment agency and the employment agency in turn entered into
an agreement with Mainpay.
8. Mainpay changed the form of contract which it used to engage its workers on 6 April
2013. The contract in use between 6 April 2010 and 5 April 2013 is referred to as “the 2010
Contract” and the subsequent contract as “the 2013 Contract”.
9. At FTT[32]-[71], the FTT made various findings of fact under the headings set out below,
none of which are challenged in this appeal. The findings material to this appeal can be
summarised as follows.
The 2010 Contract
10. The 2010 Contract was implemented with the assistance of the law firm, Mishcon de
Reya (“Mishcon”). It was clear from Mishcon’s advice that it was not intended to be a contract
of employment. This is reflected in Clause 2(1), which states that it is a contract for services
and in Clause 2(2), which states that it will not give rise to a contract of employment: FTT[32].
11. Under Clause 3(1) Mainpay agrees to try and obtain suitable assignments for the workers,
but is under no obligation to offer any work and the worker is under no obligation to accept
any work which may be offered to them by Mainpay: FTT[34]. The worker has no right to be
paid anything by Mainpay when they are not working on an assignment: Clause 4(2).
2
12. Various obligations were imposed on the worker, including to co-operate with the end
client’s reasonable instructions and to accept the end client’s direction, supervision and control:
FTT[39].
The 2013 Contract
13. At FTT[42]-[45], the FTT stated as follows:
42. There is no dispute that the 2013 Contract is in fact a contract of
employment and it is clearly intended to be one. It is headed “Employment
Agreement” and clause 2.1 confirms that it is a contract of service. The key
question in relation to the 2013 Contract is whether it is an overarching
contract of employment (covering not only the assignments but also the gaps
between assignments) or whether each assignment constitutes a separate
employment.
43. The contract starts when the worker commences their first assignment and
continues until it is terminated. It governs all assignments undertaken by the
worker in the meantime (clause 2.1) and is stated to operate and be effective
between assignments (clause 2.2). Should the worker wish to take up another
employment or work for anybody else whilst the contract is in effect, Mainpay
must give its prior written consent (clause 2.2).
44. Clause 3.1 imposes an obligation on Mainpay to obtain suitable
assignments for the workers. It also imposes on the worker an obligation to
consider any suitable assignment obtained by Mainpay.
45. In addition to this, Mainpay guarantees to offer the worker a minimum of
336 hours of work a year (clause 5.2) although the contract does not provide
for the worker to receive any payment if the guaranteed minimum number of
hours is not offered.
Obtaining assignments
14. The FTT found that the arrangement operated such that a worker would agree an
assignment with an agency, and the agency would then provide details of the assignment to
Mainpay, which would complete an assignment schedule on its online portal, which workers
could log into: FTT[51]. The assignment was agreed between the agency and the worker:
FTT[53].
The process for paying subsistence expenses
15. The guide to claiming expenses produced for workers by Mainpay for 2010/11 stated as
follows (FTT[56]):
To claim your standard Daily subsistence Allowance, you are not required to
do anything as Mainpay claims this for you automatically on your behalf based
on how many days you have worked for each particular week.
16. At FTT[57], the FTT noted that this was supported by the “frequently asked questions”
accompanying the guide, which stated:
What is subsistence Allowance? Mainpay are able to account for a proportion
of your income as subsistence Allowance. This means that typically £13 of
your daily rate will be tax free. This is automatically allocated to your invoices
and you are not required to send in supporting evidence. This allowance is
specifically in relation to the cost you incur for breakfast and lunch.
17. The guide was amended in 2013/14 to say that workers should retain the original receipts
for expenses for six years in case they were requested by HMRC: FTT[60].
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting