InReed Employment v HMRC[2015] EWCA Civ 805 (28 July 2015), the Court of Appeal dismissed Reed’s appeal, finding that the salaries of its temporary workers (temps) had not been reduced.
Reed was appealing against the UT’s decision that payments made pursuant to two sets of arrangements with employees, relating to travel expenses, were earnings liable to PAYE and NICs. Reed’s case was that it had paid employed temps less by way of salary than would otherwise have been the case, together with (contractually separate) payments made in respect of travel expenses under ‘salary sacrifice’ arrangements.
The principal issue was whether, under the employed temps’ contracts of employment, Reed: (a) made payments reimbursing the employed temps’ travel expenses, in addition to paying their wages; or (b) made a single global payment, in which the payment on account of travel expenses was simply part of the employed temps’ overall wages.
The Court of Appeal found that scenario (b) applied. What the employee had already earned was the product of the hours worked and the hourly rate, as provided by the contract terms. ‘The answer to the question “Will I receive less pay?” given by the staff handbook was an unequivocal “No”.’ Similarly, payslips did not show that employees had agreed to a reduced wage plus a tax free travel allowance.
Why it matters: The amount in dispute represented approximately £158 million. The litigation involved both a tax appeal on the substantive issues and an application for judicial review. The Court of Appeal found against Reed unanimously, in circumstances where neither the legal documentation nor the communications to employees suggested a reduction of remuneration.
InReed Employment v HMRC[2015] EWCA Civ 805 (28 July 2015), the Court of Appeal dismissed Reed’s appeal, finding that the salaries of its temporary workers (temps) had not been reduced.
Reed was appealing against the UT’s decision that payments made pursuant to two sets of arrangements with employees, relating to travel expenses, were earnings liable to PAYE and NICs. Reed’s case was that it had paid employed temps less by way of salary than would otherwise have been the case, together with (contractually separate) payments made in respect of travel expenses under ‘salary sacrifice’ arrangements.
The principal issue was whether, under the employed temps’ contracts of employment, Reed: (a) made payments reimbursing the employed temps’ travel expenses, in addition to paying their wages; or (b) made a single global payment, in which the payment on account of travel expenses was simply part of the employed temps’ overall wages.
The Court of Appeal found that scenario (b) applied. What the employee had already earned was the product of the hours worked and the hourly rate, as provided by the contract terms. ‘The answer to the question “Will I receive less pay?” given by the staff handbook was an unequivocal “No”.’ Similarly, payslips did not show that employees had agreed to a reduced wage plus a tax free travel allowance.
Why it matters: The amount in dispute represented approximately £158 million. The litigation involved both a tax appeal on the substantive issues and an application for judicial review. The Court of Appeal found against Reed unanimously, in circumstances where neither the legal documentation nor the communications to employees suggested a reduction of remuneration.
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