Originally posted by Law Speed - ( https://lawspeed.com/hmrc-pursues-umbrella-company-over-tax-relief-on-travel-expenses/)

It has been reported that an umbrella company has been ordered to pay back incorrectly claimed tax relief of some £11m to HMRC.

According to the report the umbrella company, Exchequer Solutions Limited, believing that expenses were not taxable, had paid expenses to its workers without deducting PAYE and NICs. The First Tier Tribunal decided that the workers were not employed on overarching employment contracts and thus the expenses were taxable. An overarching employment contract is one where the worker remains employed by the umbrella company in periods when not deployed to a hirer on a supply contract.

This decision is based upon specific facts and arrangements, so does not apply to all umbrella providers, many of whom address the overarching nature in different ways, nor does the decision involve tax debts being transferred to agencies as in this case payments have been treated as employment income. However, it demonstrates again HMRC’s determination to pursue unpaid levels of tax in the umbrella sector and follows HMRC’s recently published decision to pursue contractors under the managed service company rules to the tune of £50m. Regardless of whether Exchequer appeals the decision, fallout in the chain of supply is perhaps inevitable.