News & Insights

Back to News & Insights Archive

"Reed" all about it!

6th August 2015

The Court of Appeal has recently passed judgement on the Reed Employment and Others V HMRC in respect of a salary sacrifice arrangement, whereby tax-free allowances were paid to agency workers. The Court of Appeal found the arrangements to be ineffective and now leaves Reed facing a liability which is estimated to be in the region of £158 million.

Whilst other agencies may need to review their existing arrangements, it is highly likely that the facts of the case are unique to Reed and so may not impact as significantly elsewhere. Furthermore, changes which have been introduced within Finance Act 2015 will prevent salary sacrifice arrangements being used, not only in respect of tax-free allowances, but also for living accommodation.

Salary sacrifice remains a valuable tool for providing employees with certain benefits, for example:

  • Pension contributions;
  • Professional subscriptions;
  • Work related training; and
  • School fees remission for employees working at Independent Schools.

However, a very important lesson to be learnt from the Reed case is to ensure your employees fully understand the basis upon which any salary sacrifice arrangement is being structured and the documentation clearly demonstrates a variation in the employee’s terms and conditions of employment.

For further information regarding salary sacrifice arrangements then please contact Nick Bustin, Director of Employment Tax on