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

The main question of course is whether the subsistence expenses are deductible for PAYE/NIC purposes. However, in coming to a conclusion on this question, the cases put forward by the parties require the Tribunal to determine a number of issues which can be summarised as follows:

In relation to the 2010 Contract, notwithstanding that it was expressed not to be a contract of employment, and was drafted on the basis that it was intended to be an agency contract, it was a contract of employment in relation to each individual assignment.

The provisions contained in sections 44 to 47 ITEPA deal with situations where an individual secures assignments with an end client through an agency, and, where they apply, deem the worker to hold an employment with that agency. If, contrary to the FTT’s conclusion, the 2010 Contract had not been a contract of employment, but rather an agency contract within these provisions, then there would have been a single deemed employment between Mainpay and its workers which covered all assignments.

The 2013 Contract was agreed by the parties to be a contract of employment in relation to each individual assignment. The question was whether (as Mainpay contended) it was a global or overarching contract of employment, including during the gaps between assignments. The FTT decided that the necessary mutuality of obligation did not exist between assignments, because of the absence of any obligation on workers to accept any assignment, meaning that the 2013 Contract was not a global or overarching contract of employment. The FTT stated that workers had “an absolute and unfettered discretion” whether or not to accept any work which might be offered.

Mainpay argued in the alternative that even if the 2013 Contract was not an overarching contract of employment, it nonetheless created a single (albeit not continuous) employment relationship, with the result that each workplace was only a temporary workplace. The FTT rejected this argument, agreeing with HMRC that the contract between Mainpay and its workers should be analysed as a framework agreement which provided for the basis on which consecutive contracts of employment arose each time an assignment was entered into.

Mainpay argued in the alternative that even if each workplace attended by a worker was not a temporary workplace, it was not a “permanent” workplace either, because the definition of permanent workplace required “regular” attendance. The FTT rejected this argument, and concluded that, even if this was wrong, an employee who attended a workplace during every day during which the employment subsisted attended that workplace “regularly”.

In relation to Mainpay’s use of round sum or benchmark rates, the FTT rejected Mainpay’s argument that, if the payments were otherwise deductible, it was irrelevant that Mainpay had not obtained a dispensation from HMRC. Since Mainpay had not obtained a dispensation, any amounts which were otherwise deductible could only be deducted if the particular expenses had in fact been incurred.

In relation to the tax years ended 5 April 2011 and 5 April 2012, for which HMRC needed to establish that any loss of tax was brought about carelessly, the FTT considered that the alleged carelessness related to whether the expenses were deductible at all, and that Mainpay did fail to take reasonable care, which caused a loss of tax. The relevant determinations and decisions were therefore validly issued.