Liability of salary sacrifices

A recruitment consultant offered temporary workers a mobile advantage plan (MAP) under which they agreed to a reduction in their salary each week in return for a payment for their travel and subsistence expenditure. The company would save on National Insurance and the employee on tax because the travel and subsistence expenses were tax free.

HMRC issued an assessment for £529 754 in December 2013 covering periods back to July 2009. It issued another assessment for £186 344 one year later. Both were raised on the basis that the salary deductions related to a taxable supply of operating the MAP scheme to the employees. The taxpayer said there was no supply of services from it to the employees; instead the employees accepted lower wages in return for the payment of tax-free expenses for travel and subsistence.

The First-tier Tribunal agreed with the taxpayer that the salary deduction did not...