HMRC successful in tax case over temp staff

Nationwide recruitment agency Reed has been dealt a harsh blow by three Court of Appeal judges who have found against them and in favour of HM Revenue and Customs this week. In a case which concerned the taxman’s belief that it was owed £158 million by the recruiter, travel and subsistence claims were scrutinised in order to establish whether they should have been subject to PAYE tax and National Insurance Contributions.

The judges ruled that the tax-free payments made to reimburse temporary staff for their expenses were not allowed, and that the PAYE and NIC savings made both by the employees and the agency itself needed to be treated as part of the temps’ wages. There were two periods during which the payments were made – 1998 to 2002 and 2002 to 2006, and the agency was determined to have made questionable payments during both.

Once this issue was determined, the other grounds on which Reed brought the appeal were dismissed, and costs were awarded to HMRC. Reed were disappointed in the result, although they pledged that the ruling would not have an impact on any of their employees, either past or present. They say that they are keen to work with HMRC in order to resolve the matter, suggesting that it is the end of the line for the ongoing dispute which has been brought to appeal twice before, in 2012 and in 2014.

HMRC have pointed out that they will not hesitate to bring cases such as this to court and believe that the ruling demonstrates that they were right to challenge the complexities of Reed’s arrangements when it came to paying Income Tax and National Insurance.

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