When is a temporary workplace a permanent workplace?
By Justine Riccomini, Head of Tax (Employment and Devolved taxes)
28 February 2023
Justine Riccomini considers the outcomes of the Mainpay case, which involved a debate over whether workplaces for agency workers were temporary or permanent.
Mainpay – the background
The case was made even more complex by the fact that in this case, the workers in question were temporary workers who were ostensibly engaged under an umbrella, or overarching, contract, but whose 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 s. 65 ITEPA 2003). The appellant also appealed against the fact that assessments had been extended to six years due to the levels of carelessness HMRC considered had been demonstrated. This action was taken in accordance with ss. 36 and 118 Taxes Management Act 1970.
Agency contracts – what is different about them?
Where there is a series of engagements under an agency contract, it is possible for the engagements to be deemed to form part of an overarching single employment contract under ss. 44 and 45 ITEPA 2003. Another section of ITEPA (at s.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 actually the case? Each case has to be considered on its own merits and careful attention needs to be paid to the definitions.
What makes 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, because they are 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 EIM32065 on GOV.UK:
Section 339(3) ITEPA 2003
"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 rule, you must consider the following additional rules:
- the 24 month rule, see EIM32080
- the fixed term appointment rule, see EIM32125
- the depots and bases rule, see EIM32160
- the area rule, see EIM32190
These rules can only apply if the workplace is capable of being a temporary workplace by reference to S339(3).”
Note that a temporary workplace can become a permanent workplace if any of the above rules. Therefore, the position needs to be monitored regularly in case any changes occur to the working arrangements.
Discussion
In Mainpay, the company decided that every assignment which the workers undertook under the umbrella contract was to be treated as one assignment which took them away from the normal (permanent) place of work, which meant in turn that the places visited to execute the assignment were temporary. Their travel to and from home to get to those locations, as well as any subsistence they claimed, was therefore (in Mainpay’s eyes) eligible for tax relief and could be reimbursed in full.
HMRC came to the opposite conclusion and stated that just because an overarching contract existed, did not mean that each assignment was to be treated as a temporary workplace. In fact, they argued each separate location was the new permanent workplace for that period in accordance with guidance set out at EIM32125.
The Tribunal found for HMRC after conducting some in-depth reviews of the reality of the arrangements in place.
Conclusion
Ideally, employers and agents should consider the order in which the decision needs to be made is in line with s.339 (3) ITEPA 2003 so that if it is questioned by HMRC, a record of the thought process and reasonable care taken to make the right decision can be demonstrated. HMRC conducts many settlements on this basis alone each year.