January 30, 2012
Twelve companies forming part of the Reed Group have lost an appeal at the First Tier Tribunal over the tax treatment of travel and subsidence payments. The payments were made to staff on temporary contracts. The payments were made as salary sacrifices. The Tribunal agreed with HMRC that these should have been subject to PAYE.
A spokesperson for the Reed Group said “We are extremely disappointed with the decision taken by the tax tribunal and we will be appealing. The case raises a number of highly complex legal issues and it has taken over nine months for this decision to be reached. We would like to clarify that this is a dispute between HMRC and Reed Group, and this case does not have an impact on temporary workers past or present. There has also been no decision taken on the size of the claim, and Reed Group disputes the figure proposed by HMRC."
One of the concepts considered in the complex case included whether the scheme was effective as a salary sacrifice arrangement. The tribunal concluded that a salary sacrifice implies a reciprocal arrangement between employer and employee. The employee must give up their salary in return for a recognisable benefit provided by the employer. The Tribunal concluded that the scheme in the case was not an effective sacrifice because the Reed Group did not offer something in return and also retained a significant amount. Also it did not qualify because employees could opt out at any time.
