In Mainpay Limited v HMRC [2022] TC08678, the First Tier Tribunal (FTT) found workers for an umbrella company could not claim travel or subsistence expenses for work assignments. Each agency assignment was a separate employment and the underlying workplace was a permanent workplace which prevented the expense claims.

  • Mainpay Limited (Mainpay) is an Umbrella Company that provides temporary workers with contracting support.
  • Mainpay has contracts with other employment agencies.
  • Workers are contracted to Mainpay and provide services to end users such as hospitals and schools through the employment agency.
  • Mainpay claimed that the workers were carrying out their assignments at temporary workplaces and as such:
    • Travel expenses to and from that workplace were tax deductible.
    • Subsistence could be repaid without tax and National Insurance liabilities using benchmark rates without obtaining dispensation from HMRC.
  • HMRC made Regulation 80 PAYE determinations on the basis that the assignments were in fact separate employments which made the workplaces permanent which denied:
    • Deductions for travel.
    • Subsistence payments.

The FTT noted that:

  • Travel expenses are not an allowable deduction if they are ordinary commuting to a permanent workplace.
  • A temporary workplace is a place attended in the performance of the duties of employment for a task of limited duration or another temporary purpose.
  • A workplace is not a permanent workplace if:
    • It forms the base from which employment duties are performed or the tasks carried out to fulfil the employment duties are located there.
    • Attendance at that workplace lasts more than 24 months or comprises the entire period in which the worker holds the employment.

It found that:

  • The contracts between the workers and Mainpay were employment contracts as:
    • There was sufficient Mutuality of Obligation to be an employment contract as the workers agreed to provide their services for payment.
    • Mainpay had sufficient Control for it to be an employment contract as it delegated day-to-day control of the worker to a third party, that delegation was exercising control over the worker.
    • The contract prevented the worker from acting in a detrimental way to Mainpay.
    • The only contract the worker had was with Mainpay which supported the fact that Mainpay had control over any underlying assignments.
    • Mainpay had the right to terminate an assignment without prior notice.
    • There were no other provisions in the contract which prevented it from being a contract of employment.
    • That the contracts were not intended to be a contract of employment was not a defining factor.
  • The assignments were not performed under a single employment and each assignment represented a separate employment as:
    • The employment contracts with Mainpay were a framework which was modified as specific assignments were given to workers.
    • While those assignments were undertaken, there was an employment as the assignments had terms attached in respect of pay, location and duration.
    • When there were periods between assignments, the worker was not under an employment contract, there was insufficient Mutuality of Obligation as workers could turn down further assignments and they had no obligation to accept assignments.
    • While contracts guaranteed that Mainpay would offer 336 hours of work, there was no corresponding obligation to pay for that work or make goods if no work was offered.
  • The workplaces are ‘Permanent Workplaces’ meaning travel and subsistence payments are not deductible:
    • As each assignment is a separate employment, the workplaces cannot be temporary workplaces.
    • The workplace is attended regularly over the course of the employment no matter how short that employment may be.
  • Round sum expenses are not deductible without evidence where there is no dispensation agreed with HMRC as:
    • Having a dispensation was a legislative requirement for using scale rates.
    • The only amounts which could be deducted were those which could be evidenced.
    • There was no evidence that the expenses reimbursed had in fact been paid.
  • The loss of tax was brought about carelessly despite getting legal advice as:
    • Lawyers advised Mainpay to retain records which it did not do.
    • The legal advice was not based on all the facts, no details of what expenses would be claimed and how the claims would be made.
    • Mainpay’s staff were experienced in the umbrella company market and should have been aware the advice they were receiving was employment rather than tax-related and separate tax advice was not sought.

The appeal was dismissed.

Useful guides on this topic

Agency Workers: Employment intermediaries rules (subscriber)
What are the tax rules for Employment Intermediaries and Agencies? Are agency workers subject to PAYE? 

Agency workers: At a glance
What is the tax treatment of workers supplied through UK-based agencies, employment businesses or other staff supply intermediaries?

Starting Work 5.  Agency or Umbrellas
Working via an agency: how to spot whether you are being paid correctly. This guide shows you what to expect.

Travel (employer’s guide)
How do employers apply the tax rules to travel costs? What is available for subsistence costs? What are the rules on home-to-work travel?

Subsistence (employer’s guide)
Subsistence is the tax term for food and drink. What can be claimed? What are the rules for employer intermediaries? How do claims affect VAT, NICs and Income Tax?

Subsistence (employees)
Can employees claim tax relief for subsistence? How do you make a claim?

Client guide: Reasonable care and tax penalties
What triggers a tax penalty? What standard of care is expected from a taxpayer? What is reasonable care? When is an error careless?

External links

Mainpay Limited v HMRC [2022] TC08678

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