In August 2015, it was reported that the Court of Appeal had found in favour of HMRC in a case it had brought against Reed Employment, one of the UK’s largest and most well-known recruitment and employment agencies. It is estimated that as much as £158 million was protected as a result of this judgement. The facts of the case concerned a practice Reed Employment undertook with its clients in temporary employment contracts between 1998 and 2006. During this period the company made non-taxable payments to these individuals to cover their travel expenses. The potential savings from not paying the tax and National Insurance Contributions due on such expenses, which were significant, would then be shared between Reed Employment and the employed temp. Not surprisingly, HMRC were far from happy with such an arrangement. They argued that as the payments were made as part of the overall wages of the employed temp, they were therefore subject to PAYE and National Insurance Contributions. The original case took place in early 2014, in which Reed Employment’s argument was based on the fact that HMRC was aware of and had originally allowed the arrangement. Their view was that because of this, it was unfair to now expect Reed Employment to pay any tax and National Insurance Contributions due on the expense reimbursements. The court refused to accept this as a valid argument, instead taking the view that while HMRC may have had the opportunity to consider the arrangements in question, it had not in fact been given a sufficiently full and comprehensive picture by Reed Employment of how the company actually worked. As a result, the Upper Tribunal endorsed an earlier First-Tier Tribunal judgement, which agreed with the view of HMRC that expense payments were part of the temporary employee’s ordinary salary payments, and consequently found in its favour. Reed Employment felt they still had a strong case to make and decided to contest this decision. The Court of Appeal ultimately dismissed Reed Employment’s appeal however and awarded HMRC costs. HMRC was naturally very pleased with this decision given the figures in question and the fact they had made the decision to litigate. 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 in cases if necessary to secure the tax due.” Salary sacrifice benefits are offered by a number of employers and enjoyed by their employees. As a result of such arrangements, individuals are able to effectively purchase a range of services and products for prices that are exceptionally competitive because of their exemption from tax and National Insurance Contributions. It is important however for employers to tread carefully in this area and make sure they are complying with all the relevant regulations because, as the Reed Employment case makes clear, HMRC are prepared to litigate when they discover what they believe to be transgressions.