Exchequer Solutions Ltd v The Commissioners for HMRC

An overarching contract of employment requires mutuality of obligation throughout the whole contractual period, including gaps between assignments. The putative employer must have an obligation to provide work, pay a retainer or confer another meaningful benefit, and the individual must have an obligation to accept at least some work.

Maintaining relationships with employment agencies, providing an employment structure or remaining on an umbrella company’s books does not itself constitute the provision of work capable of being accepted by the individual. Travel between home and a permanent workplace remains ordinary commuting and is not excluded from taxable or NICs earnings merely because it is reimbursed.

Exchequer Solutions Ltd, an umbrella company serving the construction sector, appealed against the First-tier Tribunal’s decision, reported as Exchequer Solutions Ltd v HMRC [2022] UKFTT 181 (TC). The FTT held that individuals were employed during particular construction assignments but that no overarching contract of employment covered the gaps between assignments.

The appeal concerned three issues: whether there was sufficient mutuality of obligation for an overarching employment contract; whether HMRC’s Regulation 80 determinations were invalid for failing to specify the relevant class of employees; and whether reimbursed travel expenses were earnings for NICs purposes.

1. Overarching contract. The appeal on mutuality was dismissed. The FTT had directed itself to the correct contractual-interpretation principles, including the primacy of the contractual language and the relevance of facts known to the parties when the agreement was made. Its factual findings were not open to appellate interference.
2. The relevant contract was a framework arrangement. ESL did not undertake to provide construction work during gaps between assignments. Clause 3.2, read in its commercial context, referred to ESL maintaining a structure and relationships through which assignments might be undertaken, not to providing personal work for the individual. Such agency-relationship work was not capable of being accepted by the individual and therefore could not establish mutuality.
3. The contractual provisions concerning statutory sick, maternity and paternity benefits, notice and remaining on ESL’s books did not provide the necessary employment benefit. They conferred no more than statutory entitlements and did not establish that employment continued between assignments. The individuals were free to work for other umbrella companies, while ESL gave no guarantee of work.
4. It was unnecessary to decide wider disputes about whether an obligation to endeavour to provide work, a benefit of value, or reciprocal contingencies could satisfy mutuality. On the facts found, there was no obligation, even a contingent one, to provide work or accept it. The Tribunal also declined to decide the control issue because it was academic.
5. Regulation 80. The determinations were valid. ESL accepted that the wording could be construed in the light of relevant correspondence. That correspondence identified the travel and subsistence expenses and the construction workers working on assignments. Alternatively, any defect would have been cured by section 114(1) of the Taxes Management Act 1970.
6. NICs earnings. Reimbursement of ordinary commuting expenses was remuneration or profit derived from employment and remained within NICs earnings. The authorities concerning reimbursement of expenses incurred in performing employment duties did not remove commuting payments from the scope of earnings. The appeal was dismissed.

• Upper Tribunal (Tax and Chancery Chamber): appeal from the FTT dismissed. The Tribunal upheld the decision reported as [2022] UKFTT 181 (TC).