Reed Employment v HMRC

In Reed Employment v HMRC (FTC/34/2012 – 9 April 2014) the UT confirmed the decision of the FTT that salary sacrifice arrangements implemented by Reed to avoid income tax and NIC liabilities totalling £158m were not effective.

The decision concerned Reed’s employment business which supplied temporary workers (that were employees of Reed) to clients. Reed had implemented a scheme whereby travel expenses were paid to employees under separate contractual arrangements. This was done on the basis of advice that the payment of travel expenses was subject to PAYE and NICs only under ITEPA 2003 s 72 and deductible under ITEPA2003 s 338.

The UT noted that the key to determining whether Reed’s employees had made an effective salary sacrifice was to ascertain the true construction of the contractual arrangements. Heaton v Bell [1970] AC 728 was authority for the proposition that ‘a mere re-labelling of a part of...