Reed left owing £158m after losing their claim on its umbrella workers

Recruiters must scrutinise their travel and subsistence schemes to avoid tax liabilities from HMRC, a company has warned.

This follows last month’s tribunal ruling against Reed which found that the recruiter is now liable for PAYE and national insurance contributions on salaries given to its directly employed temporary workforce between 1998 and 2006. The Upper Tribunal endorsed the earlier tribunal’s findings – that the expense payments were part of the temporary workers’ ordinary salaries.

The company now owes £158m after losing the claim on its umbrella workers’ expenses claims against HMRC, despite the government department giving Reed a dispensation.

According to employment business MainPay, agencies must scrutinise their entire process and tighten up contracts, particularly in relation to travel and subsistence schemes, even if they appear to have been approved by HMRC.

“While this ruling has been unfavourable for Reed, it represents a stark warning, but more importantly, an opportunity for others to get their houses in order and avoid similar liabilities, potentially amounting to many millions,” said Graeme Harker, director of MainPay.

“It should prove to be an invaluable guide, allowing agencies to tailor their processes and ensure that they continue to be on the right side of HMRC.”

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