The issue in the case was whether the taxpayer company – Pertemps Ltd – was liable to account for VAT in relation to the operation of a salary sacrifice scheme for temporary workers. The workers agreed to forego a proportion of salary in return for the payment of expenses
by Pertemps. Pertemps made a small ‘administration’ charge of between £0.50p and £1.00 to each staff member for each shift worked
and HMRC considered that this constituted a supply of services for consideration (ie a business or ‘economic’ activity for VAT purposes).
The First-tier Tax Tribunal allowed Pertemps’ appeal against HMRC’s ruling and HMRC appealed that decision to the Upper Tribunal.
The Upper Tribunal has found against HMRC ruling that Pertemps’ operation of the salary sacrifice scheme was not a business activity
and that it supplied no services to the workers in return for the administration fee.
Source Grant Thornton
