What recent tribunal decision means for umbrella company arrangements
A recent First-tier Tribunal decision in MyPay Ltd v HMRC (released 2 June 2026) provides further clarity on the tax treatment of travel and subsistence expenses in umbrella company arrangements.
The Tribunal dismissed the taxpayer’s appeal in full, further reinforcing HMRC’s long-standing position and the direction of recent case law in this area.
Background
MyPay Ltd operated as an umbrella company, employing workers who undertook temporary assignments for end clients, typically sourced via recruitment agencies.
As is common in these arrangements, MyPay acted as the employer, managing payroll and compliance while workers moved between assignments.
The central question considered by the Tribunal was whether:
- Workers were employed under a single overarching contract of employment, or
- Each assignment represented a separate employment
This distinction is critical, as it determines whether travel between home and the workplace qualifies for relief or is treated as ordinary commuting.
Tribunal decision
The Tribunal concluded that each assignment constituted a separate employment.
In reaching this decision, it found there was insufficient mutuality of obligation between assignments – meaning there was no genuine ongoing employment relationship covering periods between roles.
As a result, each assignment location was treated as a permanent workplace for tax purposes.
Travel and subsistence: the tax position
Given this conclusion, travel between a worker’s home and the assignment location was treated as ordinary commuting. This means no tax relief is available for travel or subsistence expenses in these circumstances.
This outcome aligns with HMRC’s position that, in most umbrella arrangements, workers are not entitled to claim relief for these costs.
Reliance on HMRC dispensations
MyPay also argued that a historic HMRC dispensation supported their treatment of expenses.
However, the Tribunal rejected this argument, confirming that:
- The dispensation was limited in scope
- It did not apply to home-to-work travel
- It only covered travel undertaken away from a normal place of work
A consistent direction of travel
This decision is consistent with other recent cases, including Mainpay and Exchequer Solutions, where similar arguments around overarching contracts have been rejected.
The courts have taken a clear and consistent approach: The practical reality of the working arrangement will take precedence over contractual wording.
Key takeaways
- Overarching contracts are unlikely to be accepted where there is no real obligation to provide or accept work between assignments
- Framework agreements alone are unlikely to establish continuous employment
- Travel to assignment locations will generally be treated as ordinary commuting
- Historic dispensations provide limited protection unless they clearly cover the specific payments in question
What this means for businesses
Businesses operating umbrella models or engaging with umbrella providers should review their arrangements carefully.
In most cases:
- Travel and subsistence relief will not be available where workers are engaged on an assignment-by-assignment basis
- Reliance on historic practices or contractual interpretations may create ongoing compliance risk and potential exposure
- There is increased exposure to tax liabilities, interest and potential penalties where treatment does not align with HMRC’s view
Review arrangements as soon as possible
Early review of arrangements allows businesses to:
- Identify potential areas of exposure
- Align policies with current HMRC and Tribunal positions
- Avoid retrospective challenges and disruption
- Put robust processes in place going forward
We’re here to help
Our specialists can support businesses in:
- Reviewing umbrella company arrangements and employment models
- Assessing the treatment of travel and subsistence expenses
- Identifying compliance risks and potential historic exposure
- Implementing aligned, practical solutions going forward
If you would like to review your current arrangements or understand the potential impact on your business, get in touch with our specialist Employment Tax services team.
