Umbrella company hit with £11m tax bill at tribunal copy

Umbrella company hit with £11m tax bill at tribunal

The ruling – which the umbrella will appeal – relates to expenses paid to contractors over five years

Exchequer Solutions, an umbrella company in Chester, has been ordered to pay more than £11m in backdated tax and National Insurance Contributions (NICs) to HMRC.

This First-Tier Tribunal (FTT) ruling hinged on the payment of travel and subsistence expenses made by Exchequer Solutions to its contractors. 

The FTT held the view that Exchequer Solutions had made errors when processing contractor expenses between the 2013/14 and 2016/17 tax years and therefore owed £11m in NICs and income tax.

Specifically, the case related to the nature of the employment contracts held between the workers and Exchequer Solutions: 

  • Under an overarching contract of employment, workers engaged by Exchequer Solutions would be entitled to the tax-free reimbursement of travel and subsistence costs.
  • If workers operated under a separate employment contract for each assignment, the expenses are subject to income tax and NICs.

The FTT judged that there was no overarching contract of employment between Exchequer solutions and the contractors it employed.

As such, the expenses payments to contractors were liable for income tax and NICs in excess of £11m over the course of the tax years in question.

“An attack on the umbrella industry as a whole”

In a statement published by Computer Weekly, the Managing Director of Exchequer Solutions, Mike Lowndes, said that the company was “extremely disappointed” and would appeal the tribunal decision.

“We operate in a technically complex industry and have continually sought financial advice from the UK’s leading tax advisers,” he said. 

“There is no statutory definition of an overarching contract so this matter is a technical argument on employment law and tax. We feel that HMRC’s approach to this matter is an attack on the umbrella industry as a whole and would like to extend our support to our peers within the industry,” said Lowndes.

“While we are extremely disappointed by the ruling, we will be appealing the outcome and would like to thank our dedicated team, clients and partners for their continued support.”

“Compliant with FCSA’s codes”

The FCSA – where Mike Lowndes served as a board member, before stepping down following the tribunal – has also released a statement, criticising “the rush to judgement that we have seen from some quarters” as “premature”.

The association for umbrella companies said: “Exchequer first became FCSA members in May 2020, more than three years after the period in question and were found to be compliant with FCSA’s Codes at that time. They have subsequently been assessed by independent experts to be compliant with FCSA’s Codes,” said the statement.

The FCSA added that assessment is carried out by external parties “in a rigorous and thorough manner.”


  • louhop says:

    First they came for the self-employed and made them create limited companies, then they came for the limited companies and made them turn to umbrella companies, then they came for the umbrellas… what next?

  • JoJo San says:

    Needless complexity!!!

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