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UK Tribunal Confirms Judgment Against Travel Allowance

by Amanda Banks, Tax-News.com, London

15 April 2014


The Upper Tax Tribunal has confirmed that a major UK employment agency must pay Pay As You Earn (PAYE) and National Insurance Contributions (NICs) on temporarily employed staff's full earnings, after wrongly deducting a portion from the taxable base of these levies as a travel and subsistence allowance.

The decision confirms that the Reed Employment is liable to pay GBP158m (USD263.9m) in unpaid PAYE and NICs.

Over the eight-year period 1998 to 2006, Reed described part of the salary earned by its employed temporary staff as expenses for travel to work that were paid without making deductions for PAYE and NICs.

Reed had argued that, because HM Revenue and Customs (HMRC) originally allowed these arrangements, the employer could not now be expected to pay any PAYE and NICs due on the expense reimbursements.

However, the Upper Tribunal endorsed an earlier First-tier Tribunal judgment which found that the expense payments were part of the employed temporary staffs' ordinary salary payments and, as such, PAYE and NICs were due on them. It also found that, when HMRC originally considered Reed's arrangements, the tax authority had not been given a full picture by the company of how they worked.

Ruth Owen, Director General Personal Tax at HMRC, said: "The department has used every method at its disposal to secure the tax due, and its position on the case has now been backed by two courts."

Responding to the ruling, Reed stated: "We are disappointed with the Decision of the Upper Tribunal and we will be seeking leave to appeal. This is a dispute between Reed and HMRC concerning arrangements that were in place over eight years ago. It does not have an impact on temporary employees past or present. Even if some tax is eventually due, the amount is still in dispute."

TAGS: court | Insurance | tax | Personal Tax | United Kingdom | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC) | individual income tax | Employment | Tax

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