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News: Large payroll companies not always the best as HMRC defeats Reed in £158m temps tax case

May 20, 2014

It has just been announced that Reed have lost their big umbrella expenses case against HMRC. A number of Reed group companies face a liability of up to £158m.

This is arguably a bigger tax development for many suppliers and hirers of contingent workers than the recent introduction of the Intermediaries Legislation (from which employed “umbrella” workers are effectively exempt).

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 tried to claim that these expenses were a ‘Salary Sacrifice’ agreed with HMRC. HMRC argued that Reed had not given them the full picture originally and that it did not qualify as a true salary sacrifice. The Tribunal agreed with HMRC.

One thing that can happen if an operator of an umbrella scheme fails is that workers who are left out of pocket following an insolvency would look to hirers to pay them, threatening employment status cases.

Source

If you are unsure about the practices of your umbrella company, contact Carrington on 0203 713 4530 or email contact@carringtonumbrella.co.uk

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