The Reed "umbrella" case – latest Court of Appeal decision goes against Reed

The saga of Reed’s appeals from 2012 against a possible ultimate liability to HMRC of up to £158m may be coming to an end. The Court of Appeal dismissed the appeals (heard on 21-22 July) in a judgement this week (Reed Employment Plc & Ors v HMRC [2015] EWCA Civ 805 (28 July 2015)).

The proposed new expenses legislation (due to come into force in April 2016)  may make this ruling of mainly academic interest, though a liability of up to £158m is a real issue for Reed. 

The relevant Reed arrangements were in operation from 1998 to 2006. Effectively the Reed liability relates to tax and NICs on umbrella worker income in that period which was paid gross (in connection with expenses) to the workers rather than net of PAYE and NICs. Other operators of umbrella arrangements would argue, as no doubt would Reed in relation to any arrangements operated since 2006, that the decision does not apply to those arrangements. It is possible however that some other organisations who ran arrangements (relating to tax free expenses for agency workers) similar to those run by Reed may have retrospective liabilities as well, though we suspect that many of the features which caused problems in this case were unique to the Reed situation.

If you have any concerns about this case or the proposals about umbrella worker expenses, personal service company expenses, the potential liability of staffing companies and hirers, and possible personal liabilities of directors please contact Kevin Barrow or Tracey Wright.