Reed accepts defeat in £158m temps' tax case

Reed has given up its nine-year battle to cancel a multi-million-pound tax demand attached to the travel and subsistence bills of 500,000 temporary candidates it placed.

The specialist recruitment agency told ContractorUK yesterday that its dispute with HM Revenue & Customs – which dates back to 2007 -- has now been “settled”.

It declined to point to any payments to HMRC, but said its “audited accounts are a factual record of the years in question” -- which, broadly, run from 1998 to 2006.

But the liability of up to £158m (Reed disputes the figure) which arises from tax and NICs on income which was paid gross to the temps in relation to expenses rather than net of PAYE and NICs, is not the only sum that the agency has given up on.

A judgement in Reed’s favour in 2011 cued up the agency to collect more than £300million in VAT that the staffing business deemed that it had overpaid to the tax department.

The vast sum (twice the amount HMRC was subsequently ruled in 2012 and 2014 to be owed over the temps’ expenses), was thanks to a tribunal finding that Reed had supplied introductory services to clients, rather than having made supplies of staff.

As a result, the agency was only liable to account for VAT on the commission element of its charge and not on the overall amount paid by the clients, which included the wages paid and associated NIC.

However, Reed is no longer pursuing the money. According to Reed Employment Limited’s annual report, the directors want to take a “low-risk approach to taxation” and as a result, all litigation between Reed and HMRC is under “cessation”.