Reed loses £158m travel expenses appeal

Reed, one of the UK’s largest employment agencies, faces a potential tax bill of £158m after it lost an upper tier tribunal decision in a long and complex dispute over whether allowances to temporary workers should be taxed as earnings.

The upper tribunal backed a judgement in 2012 by the first-tier tribunal, which said that Reed should have paid Pay As You Earn (PAYE) and National Insurance Contributions (NICs) on the salaries of temps employed between 1998 and 2006.

During this time, Reed described part of the salary earned by its employed temps (who were employed by Reed but worked for its clients) as expenses for travel to work that were paid without making deductions for PAYE and NICs.

Reed had argued that because HMRC originally allowed these arrangements it could not now be expected to pay any PAYE and NICs due on the expense reimbursements.

It also argued that its payment of temps’ travel and food expenses was part of a “salary sacrifice” scheme. The temps agreed to a lower salary in exchange for travel and subsidence allowances - so the allowances should not be taxed as earnings.

HMRC argued that it wasn’t a salary sacrifice scheme because the payment of expenses were part of the workers’ salary...

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
abelljms's picture

sight-based employee rules?

abelljms | | Permalink

 

 

i am sure Reed felt they had a point, but it seems somewhat unlikely to argue the salary sacrifice rules - if that worked we could all do it for our commuting fares.

 

their better route would have been to set each employee up as a limited co. contractor and give them occasional work etc.., always treading carefully to avoid offending ir35 etc...

 

Employees under paye just have to be paid straight and that's it unfortunately. applying sly lawyers to the problem is not a good route to a calm nights rest as the Reed FD has found out to his cost.

Allowances

mikescore | | Permalink

I have never tried this one - what is a " subsidence allowance "  - am I missing a trick here ?

 

cfield's picture

Sight-based?    1 thanks

cfield | | Permalink

Do you mean site-based by any chance? Or were you getting mixed up with the eye tests post on this bulletin? Terrible spelling.

I can't believe Reed are still fighting this, although with £158 million at stake I suppose they don't really have much choice. Apart from the salary sacrifice aspect, which apparently the employees didn't even sign up to properly in terms of varying their contracts, agency temps can't claim travel and subsistence anyway unless it genuinely is for a temporary workplace within the same assignment. A temporary workplace cannot be a site that the employee attends for all or most of the same employment. The Booklet 490 guidance is very specific about this.

Most of us on AWeb could have told them that. Amazing that such a basic error could have been made by such prominent organisations.

carroccio1958's picture

subsidence allowance

carroccio1958 | | Permalink

...well ..... the strict technical definition beloved by insurance companies is when your house finds itself at the bottom of the ravine on the edge of which it once was standing but your insurance payout is limited to about onethousand pounds as a goodwill gesture on the basis the soil erosion which caused the disaster was due to "fair wear and tear " and thus not allowable as a total rebuild claim by the underwriters .... but is instead treated under the Policy as a force majeure, Act of God or .... failing all else ... part of life s rich oattern.

All clear now ?

carroccio1958's picture

158 million !!!!

carroccio1958 | | Permalink

the "takeaway" from all this is to have had the ear of the upper tribunal peers immediately before the decision was issued and to have thence
shorted reed out of sight ..... NAUGHTY !!!

Reeds payments to temps.

BHagues | | Permalink

I have worked for Reed and they tried to persuade me to be paid by another organisation, an "umbrella company", they called it. What it meant was they offered me fuel allowance ( at a minimum of £20 per week, I only live 3 miles from the assignment ) and subsistence at £25 per week ). They tried to spin it that the service provided meant that I would be better off but when I looked at the workings out, they were wanting to charge £24.50  a week for the privilege of sorting out my payroll and the employers NI, yes that's right included in my deductions was the employers NI.I declined and insisted on the agreed hourly rate for the assignment, PAYE through Reed. I am fortunate that I am able to do the calculations to work out that I would have been about £70 per week worse off but how many of their temps just accept what they are told?