Is your umbrella company compliant?

The Court of Appeal has ruled against Mainpay Ltd, an umbrella company, confirming that workers under its model had separate employment contracts for each assignment. This decision supports HMRC’s position that workers were not continuously employed, meaning they were not entitled to tax relief for travel and subsistence as if their assignments were “temporary workplaces.”

Key Points from the Ruling

1. No Ongoing Employment Relationship

   • The court found there was no mutual obligation between Mainpay and workers between assignments (i.e. workers didn’t have to accept work, and Mainpay didn’t have to offer it).

   • Without this mutual obligation, there was no overarching employment contract linking the assignments together.

     
     

2. Each Assignment = Separate Job

   • Each assignment was considered a new and separate employment.

   • As a result, the assignment location became the permanent workplace for that job, and home-to-work travel was classified as ordinary commuting—not eligible for tax relief.

     
     

3. Invalid Expense Claims

   • Mainpay used fixed daily expense allowances (benchmark rates) without receipts and without HMRC approval.

   • HMRC and the court rejected this approach, saying allowances must be based on actual costs and properly documented.

     
     

4. HMRC's Extended Time Limits Upheld

   • HMRC was allowed to go back more than 4 years in assessing tax because the underpayment was caused by carelessness.

   • Mainpay’s reliance on non-specialist legal advice was judged to be insufficient and careless in tax matters.

     
     

Why It Matters

• Umbrella companies can’t claim ongoing employment across multiple contracts unless there’s a clear legal and practical obligation to provide and accept work.

• Workers on rolling or short-term assignments are unlikely to qualify for tax-free travel or subsistence unless very specific conditions are met.

• Blanket expense allowances without proper evidence or HMRC dispensation are high risk and likely to be challenged.

• Businesses relying on poor or vague legal advice around employment status may be found careless, opening the door for extended tax assessments.

Our umbrella offering does not include expenses, and therefore, guarantees compliance combined with simplicity. If you would like to know more about our umbrella solution, please contact us sales@mineralpayroll.com.