The main thrust of the decision in the First-tier Tribunal (‘FTT’) case of Mainpay [2023] UKFTT 16 (TC) has been overtaken by legislative changes. Nonetheless it continues to be of some relevance.
The case was about tax relief for employees for their travel (including subsistence) expenses. In particular, about whether employees had a ‘permanent workplace’ (in which case no relief was available for their expenses of travel to it).
Mainpay was an intermediary, engaging workers and placing them to work for ‘end users’ on assignments of varying lengths. Each assignment involved the worker working at a workplace which remained unchanged for the duration of the assignment. The FTT held that each separate assignment undertaken by a worker amounted to a separate employment with Mainpay. And the law says that if a worker has the same workplace for the whole period of an employment, the workplace is not ‘temporary’.
HMRC said that if a workplace wasn’t temporary, it was inevitably permanent – so no relief was available for travel costs. The FTT agreed. It rejected the company’s argument that the wording of the relevant law meant that a workplace might be neither temporary nor permanent: and that travel to a workplace in that third category was tax-deductible. No, said the FTT: workplaces are dichotomous.
The second point of interest is that the FTT expressed a view as to whether, if the expenses had been tax-deductible, Mainpay would have been entitled to reimburse them at a flat rate on a tax-free basis. Under the law as it then stood, a flat-rate payment of subsistence could be made tax-free if a ‘dispensation’ from HMRC had been sought and granted. The company had applied for no dispensation, but argued that that didn’t matter, asserting that ‘it is open to an employer to come up with an arrangement which is intended to provide a genuine reimbursement of expenses to an employee and that, as long as the arrangement does not contain any profit element, the amount is not taxable (or, more accurately, is able to be deducted) irrespective of whether it precisely equals the expenses actually incurred.’
The FTT disagreed. Even if the actual expenses had been deductible, the only basis on which flat-rate payments could be made tax-free was by agreement with HMRC under a dispensation.
The law has subsequently changed. Dispensations are no longer relevant. The law now specifies the precise circumstances in which travel and subsistence costs may be reimbursed at a flat rate. For details on those circumstances or for assistance in ensuring that your expense reimbursement is compliant, please get in touch with your usual BKL contact or use our enquiry form.