COMPLIANCE
When is a temporary workplace a permanent workplace?
Justine Riccomini FFTA AIPA Chartered MCIPD ChFCIPP, head of taxation, the Institute of Chartered Accountants of Scotland (ICAS) , explores the case which involved a debate over whether workplaces for agency workers were temporary or permanent Main points ● employees engaged on umbrella contracts claimed tax-free travel and subsistence expenses ● the First Tier Tribunal (FTT) concluded the assignments were continuous and the temporary workplaces were, in fact, permanent ● the expenses were disallowed because of this.
‘Travel and subsistence’ are those concepts people think of as being a basic tenet of employment tax deductibility, yet so many people still get it wrong. Over the years, things have become a little more complex due to various iterations of ‘employers’ having emerged – agencies, managed service companies, umbrella companies – all of which carry slightly different nuances in the employment tax practitioner’s mind. Mainpay – the background The Mainpay case, was heard at the FTT in November 2022 and the decision reached in December 2022. In the case, the argument focussed on something which could affect many employers who send employees out on assignments and pay for their travel and subsistence expenses, without subjecting them to deductions of pay as you earn and National Insurance contributions. That ‘something’ is whether the location being visited is a temporary location for tax purposes, or a permanent one – this is legislated for at Sections 338 and 339 Income Tax (Earnings and Pensions) Act (ITEPA) 2003. The case was made even more complex because, in this case, the workers in question were temporary workers, who were ostensibly engaged under an umbrella, or overarching, contract. However, their contractual status needed to be determined by the tribunal so that the temporary or permanent workplace
argument could be settled – so, were they working under an employment contract, or an agency contract? Another side issue which arose was whether the workers were paid benchmark rates of subsistence without having obtained a P11D dispensation (which is legislated for under Section 65 ITEPA 2003). The appellant also appealed against the fact assessments had been extended to six years due to the levels of carelessness HM Revenue and Customs considered had been demonstrated. This action was taken in accordance with Sections 36 and 118 Taxes Management Act 1970. Agency contracts – what’s different about them? Where there’s a series of engagements under an agency contract, it’s possible for the engagements to be deemed to form part of an overarching single employment contract under Sections 44 and 45 ITEPA 2003. Another section of ITEPA (at Section 4) can also deem there to be a single employment simply by determining that the fact pattern fits into the definition. Travel and subsistence – the general rules The rules around this concern themselves with fact, not opinion. Many employers aim for the non-taxable bucket when they classify expenses as being travel to or from
a temporary workplace – but is this just what they want it to be, or is it the reality? Each case must be considered on its own merits and careful attention needs to be paid to the definitions. What constitutes a temporary workplace? If an employee works at a temporary workplace, they can, by and large, claim their travel expenses and subsistence costs when they work there. This is because they’re deemed to be working away from their normal (permanent) place of work. Under the legislation, the definition of a temporary workplace is set out at Employment Income Manual (EIM)32065 on GOV.UK. Section 339(3) of ITEPA 2003 states, "A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose. So even where an employee attends a workplace regularly, it will be a temporary workplace and so not a permanent workplace, if the employee attends for the purpose of performing a task of limited duration or other temporary purpose. Limited duration is explained at EIM32080. Temporary purpose is explained at EIM32150. If a workplace is capable of being a temporary workplace by reference to this
| Professional in Payroll, Pensions and Reward | May 2023 | Issue 90 18
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