In HMRC v Pertemps Ltd: [2019] UKUT 0234 (TCC) the Upper Tribunal (UT) has confirmed that providing temporary staff with a salary sacrifice scheme in consideration for a small administration cost was not an economic activity and a supply for VAT made by the employer agency, it was simply an efficient method of paying staff.

Pertemps, an employment agency provided its temporary staff (temps) with a choice of payment methods.

Receive a higher salary rate per hour and claim your own expenses for tax, or

Participate in a ‘mobile advantage plan’ (MAP) scheme under which:

HMRC assessed the company VAT on the salary sacrifice, claiming that the sacrifice amounted to a supply of services by the employer to its staff for consideration and subject to VAT.

The First Tier Tribunal (FTT) decided in favour of the company, concluding that:

HMRC appealed to the UT, its appeal being that the FTT was wrong there was a supply, and it was of an economic activity and that supply was not exempt.

The company appealed that the FTT had been wrong to decide that there was any economic activity.

The UT found that:

In conclusion, whilst accepting that the MAP adjustment is capable of being consideration, there is no supply of services for VAT purposes.

Having regard to economic reality, did the supplier carry on any economic activity? The UT found not:

The UT also considered whether the operation of the MAP resulted in a transaction in a right to receive a payment of money and a “dealing in money” within item 1 Group 5 Schedule 9.

It decided that:

Comment

Useful links

Staff and VAT

Optional remuneration schemes & salary sacrifice

Travel (employer’s guide)

Subsistence (employer’s guide)

PAYE: P11D dispensations (up to 5 April 2016)

Agency workers: employment intermediaries rules

External link: 

HMRC v Pertemps Ltd: [2019] UKUT 0234 (TCC)

FTT decision

Pertemps Limited v HMRC [2018] TC06583


 

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