Recruitment Firm Reed Fails to Overturn HMRC Ruling on £158m Tax Bill

Appeal court judges have ruled against the recruitment firm Reed in a case relating to a £158 million tax bill.

The company had been aiming to convince the court that it should not owe HM Revenue & Customs (HMRC) the enormous sum because the amounts related to the travel and subsistence expenses of half a million temporary employees for whom Reed had found work.

Reed has consistently claimed that the amounts of money were not being paid to ‘temps’ as wages but were purely for expenses and so should not have been liable either to PAYE tax or National Insurance contributions.

However, three court of appeal judges have now thrown the case out and decided that Reed’s payments were in fact intended as wages and should be taxed as such.

The court also decided that HMRC should be awarded the costs involved in making its case and defending against Reed’s appeal.

PAYE and National Insurance contributions are now deemed to be due to HMRC from Reed on relevant amounts paid to temporary employees between 1998 and 2002, and between 2002 and 2008.

A spokesperson for Reed, which is among the largest recruitment companies currently operating in the UK, told ContractorUK: “We are extremely disappointed by the decision of the Court of Appeal in this case.

“This is a historical tax dispute and will not have an impact on our clients or our temporary employees past and present. We will be working with HMRC to take the matter forward.” 

Prior to this week’s ruling on the subject, a tribunal to assess the case was convened in April 2014, at which Reed’s arguments were successfully refuted by HMRC.

Welcoming the most recent ruling on the matter, Ruth Owen, director general of personal tax at HMRC, said: “This shows that we were right to challenge the complex arrangements that Reed used to try to reduce their income tax and National Insurance liabilities, and that we won’t hesitate to litigate cases if necessary to secure the tax due.”