UT/2023/000049 - [2024] UKUT 00233 (TCC)

Mainpay Limited (“Mainpay”) appeals against the decision of the First-tier Tribunal (Tax Chamber) (the “FTT”) released on 21 December 2022 (the “Decision”).

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.

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.

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.

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.