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Reed loses £158m travel expenses appeal

24th Apr 2014
Freelance journalist
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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.

The upper tribunal ruled that the expense payments were part of the employed temps’ ordinary salary payments and therefore PAYE and NICs were due on them.

It also found that, when HMRC originally considered Reed’s travel expenses scheme, which was devised by accounting firm Robson Rhodes, it had not been given a full picture by the company of how they worked.

Ruth Owen, director general personal tax, HMRC, said: “This case shows that HMRC is determined to ensure everyone pays their fair share of tax to fund vital public services. The department has used every method at its disposal to secure the tax due, and its position on the case has now been backed by two courts.”

But this is unlikely to be the end of the matter. In a statement to AccountingWEB, Reed said that it would try to challenge the tribunal decision. It also said that it disputed the amount of tax HMRC said it owed.

“We are disappointed with the decision of the upper tribunal and we will be seeking leave to appeal,” the company said in a statement.

“This is a dispute between Reed and HMRC concerning arrangements that were in place over eight years ago. It does not have an impact on temporary employees past or present.  Even if some tax is eventually due, the amount is still in dispute.”


Replies (6)

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By abelljms
27th Apr 2014 09:58

sight-based employee rules?



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.

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By mikescore
28th Apr 2014 12:37


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


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Replying to Manchester_man:
By carroccio1958
28th Apr 2014 14:46

subsidence allowance
...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 ?

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By cfield
28th Apr 2014 13:49


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.

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Replying to bernard michael:
By carroccio1958
28th Apr 2014 14:49

158 million !!!!
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 !!!

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By BHagues
28th Apr 2014 19:14

Reeds payments to temps.

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?   

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