Reed could be liable to pay £158m after tribunal decision
14 April 2014
National staffing company Reed could be liable to pay back up to £158m of unpaid tax due on the salaries of thousands of temporary workers it employed.
Mon, 14 Apr 2014National staffing company Reed could be liable to pay back up to £158m of unpaid tax due on the salaries of thousands of temporary workers it employed.
The Upper Tribunal has backed an earlier judgement that found pay as you earn (PAYE) and national insurance contributions (NICs) should have been paid on all of Reed’s employed temps’ salaries between 1998 and 2006. The £158m includes interest on the tax and NICs due.
However, Frances Lewis, a consultant at law firm Osborne Clarke, says that this does not necessarily mean that Reed will have to pay back the money, telling Recruiter: ”There’s probably room for them to appeal — that is a decision for the court.” Following the decision, Reed says it will be seeking leave to appeal.
Between 1998 and 2006, Reed failed to pay UK payroll taxes on these temps' travel expenses after arranging a payment scheme in which it paid travel reimbursements separately from their salaries.
Reed argued that, because HM Revenue and Customs (HMRC) originally allowed these arrangements, the employer could not now be expected to pay any PAYE and NICs due on the expense reimbursements.
However, the Upper Tribunal has upheld an earlier First-Tier Tribunal judgement that found the expense payments were part of the employed temps’ ordinary salary payments so PAYE and NICs were due on them. It also found that, when HMRC originally considered Reed’s arrangements, it had not been given a full picture by the company of how they worked.
Lewis says that that, following the outcome of the case, there is a possibility that HMRC could challenge companies running travel and subsistence schemes that operated before 2006.
Ruth Owen, director general personal tax at HMRC, says: "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."
Reed Executive say: "We are disappointed with the decision of the Upper Tribunal and we will be seeking leave to appeal.
"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."
The Upper Tribunal has backed an earlier judgement that found pay as you earn (PAYE) and national insurance contributions (NICs) should have been paid on all of Reed’s employed temps’ salaries between 1998 and 2006. The £158m includes interest on the tax and NICs due.
However, Frances Lewis, a consultant at law firm Osborne Clarke, says that this does not necessarily mean that Reed will have to pay back the money, telling Recruiter: ”There’s probably room for them to appeal — that is a decision for the court.” Following the decision, Reed says it will be seeking leave to appeal.
Between 1998 and 2006, Reed failed to pay UK payroll taxes on these temps' travel expenses after arranging a payment scheme in which it paid travel reimbursements separately from their salaries.
Reed argued that, because HM Revenue and Customs (HMRC) originally allowed these arrangements, the employer could not now be expected to pay any PAYE and NICs due on the expense reimbursements.
However, the Upper Tribunal has upheld an earlier First-Tier Tribunal judgement that found the expense payments were part of the employed temps’ ordinary salary payments so PAYE and NICs were due on them. It also found that, when HMRC originally considered Reed’s arrangements, it had not been given a full picture by the company of how they worked.
Lewis says that that, following the outcome of the case, there is a possibility that HMRC could challenge companies running travel and subsistence schemes that operated before 2006.
Ruth Owen, director general personal tax at HMRC, says: "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."
Reed Executive say: "We are disappointed with the decision of the Upper Tribunal and we will be seeking leave to appeal.
"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."
