RECRUITMENT FIRM REED has lost a £158m tax case against HM Revenue & Customs over a so-called salary sacrifice scheme for its temps.
Reed provided £6 subsistence and up to £11.45 a day for its temps - effectively taken from their salaries and free of income tax and NI.
The strategy was applied to 500,000 temporary staff between 1998 and 2006, and HMRC is claiming for £158m of unpaid tax and NI between 2001 and 2006.
The tax tribunal heard Reed argue that HMRC had given clearance to the scheme. An internal HMRC email referred to during the hearing suggested that could have a viable claim that the taxman had cleared the scheme. "It looks to me like we have cocked-up here," stated the email.
"We may think it necessary to consult lawyers but I think that Reed may well have a strong case under administrative law that they were entitled to rely on our representation (ruling) that the workers were employees under an overriding contract of employment," the email continued.
Reed wants a judicial review over its treatment by the taxman, reported the Financial Mail.
Whatever the legal complexities of the case, the behaviour of Reed towards its temporary staff was reprehensible throughout. However much they protest, the only conclusion a reading of the case can deliver is that this was a scheme designed to minimise Reed's tax and NI contributions, increase their competitive edge, and deliver absolutely no benefit to their workforce. Through salary sacrifice, Reed themselves milked the savings, while leaving their workers thoroughly confused by producing payslips that not even HMRC could decipher.
£158 million gives plenty of scope for Alec Reed to buy a knighthood for his services to charity, and leave a little over for himself.
Posted by: Adrian Gregory, 27 Jan 2012 | 13:55
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