Overpayments are trading receipts

Pertemps the taxpayer company was a recruitment agency supplying temporary and permanent workers to its customers who were split into two groups: contract and A-Z.

Contract customers entered into a tailored contract with the company while A-Z customers engaged the company on its standard terms of business often on a one-off basis.

Customers occasionally overpaid and where these remained unresolved were shown as a liability owed to customers until released into the profit and loss account.

HMRC said these amounts were liable to corporation tax under TA 1988 s 18(3).

Pertemps appealed.

After reviewing the evidence the First-tier Tribunal agreed with HMRC that a mistaken payment for services had the same characteristic in the hands of the recipient trader as any other payment.

When the overpayments were paid into Pertemps bank...