The Commissioners for HM Revenue and Customs v Pertemps Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Nugee,Judge Sinfield |
| Neutral Citation | [2019] UKUT 0234 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,7 August 2019 |
| Date | 07 August 2019 |
| Published date | 07 August 2019 |
[2019] UKUT 0234 (TCC)
Appeal number: UT/2018/0141
VAT – operation of salary sacrifice scheme to provide travel and subsistence
payments to employees – whether supply for VAT purposes – no – whether
economic activity – no – appeal dismissed.
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
BETWEEN:
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS
Appellants
- and –
PERTEMPS LIMITED
Respondent
Tribunal:
Mr Justice Nugee
Judge Greg Sinfield
Sitting in public in London on 9 July 2019
James Puzey, counsel, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the Appellants
Timothy Brennan QC, instructed by Anthony Collins Solicitors LLP, for the
Respondent
© CROWN COPYRIGHT 2019
2
DECISION
Introduction
1. This appeal concerns the VAT treatment of an arrangement, known as the Mobile
Advantage Plan (‘MAP’), between the Respondent, Pertemps Limited (‘Pertemps’), and
some of its employees.
2. As its name suggests, Pertemps provides permanent and temporary workers to
clients. In this appeal, we are only concerned with those employees who were working
on temporary assignments for clients of Pertemps. The employees were offered the
option of being paid a salary, out of which they would have to meet any travel and
subsistence expenses, or participating in the MAP under which they would be paid their
travel and subsistence expenses but receive a reduced salary. The amount of the reduction
was equal to the amount of the expenses payment plus a fixed amount. The fixed amount
(‘the MAP adjustment’) was, at different times, 50p or £1 per shift.
3. The advantage conferred by using the MAP was that the expenses were reimbursed
free of tax and national insurance contributions (‘NICs’). Thus, even after the payment
of the MAP adjustment, the employees were better off. Pertemps also benefited as it did
not pay primary Class 1 NICs in relation to those employees using the MAP.
4. The Appellants (‘HMRC’) took the view that the MAP involved a taxable supply
of services by Pertemps to its participating employees. HMRC considered that the
services were supplied in return for the MAP adjustment of £1 or 50p and that Pertemps
was liable to account for VAT on those amounts. Accordingly, HMRC notified Pertemps
of their decision in a letter dated 17 April 2013 and assessed Pertemps for VAT of
£715,918 in two assessments covering periods 07/09 to 07/14. There are further
assessments standing behind these appeals.
5. Pertemps appealed to the First-tier Tribunal (‘FTT’) against the decision and
assessments. In a decision released on 6 July 2018, [2018] UKFTT 369 (TC), the FTT
concluded that Pertemps did supply services to the employees but the supply was not
within the scope of VAT because the operation of the MAP was not an economic activity
for VAT purposes and allowed the appeal. The FTT also held that, if there had been a
supply, it would have been exempt.
6. HMRC now appeal, with permission of the FTT, against the FTT’s decision that
that the MAP was not an economic activity and, in the alternative, that any supply was
exempt.
7. For the reasons set out below, we have decided that the FTT erred in law when it
concluded that Pertemps made a supply of services to the employees who participated in
the MAP but that the FTT was correct when it concluded that Pertemps was not carrying
on any economic activity when it provided the MAP to employees. Accordingly,
HMRC’s appeal is dismissed.
Factual background
8. The FTT set out its detailed findings of fact at [11] to [83] of the decision and those
findings are not in dispute. In its decision, the FTT refers to the employees who were
eligible to benefit from the MAP as “flexible employees”. For the purposes of this
decision, the key findings of fact were as set out below.
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