COMPLIANCE
The Best Connection Group salary sacrifice scheme case – Justine Riccomini MSc FFTA AIPA Chartered MCIPD ChFCIPP, Head of Employment and Devolved Taxes, the Institute of Chartered Accountants of Scotland (ICAS), shares a cautionary tale for accountants and employment tax professionals
I n a First Tier Tribunal (FTT) decision issued on 6 December 2024, the case of The Best Connection Group (TBC) Ltd v HM Revenue and Customs (HMRC) was examined (please see here: https:// ow.ly/P1PM50Vrpg8). The reader finds themselves transported into the depths of a lengthy (82-page) case transcript, which concerns itself with what is essentially the tax and National Insurance (NI) treatment of three salary sacrifice sub-schemes. They had each been set up by the appellant to facilitate travel and subsistence payments to different categories of worker. TBC was a supplier of temporary staff and at any one time, had around 2,000 employees on the books. In the detail of the case decision, it becomes clear that HMRC had carried out an in-depth examination of the three schemes in operation, and produced a significant volume of evidence as to why they considered the schemes not to have worked. Tax assessments raised by HMRC amounted to around £5.8 million. I ought to point out that at the time of writing, the case isn’t yet fully concluded and there’s more on it to come. It was decided that the quantum of any settlement would be decided once the decision had been released, if necessary, by further recourse to the Tax Tribunal.
What was the problem? Three types of payment were made by TBC to employees denoted as being “participants” in the following schemes within the so-called “best pay salary sacrifice” scheme (BSS) over a period of four years ending 5 April 2013 to 5 April 2016 inclusive: 1. Payments in respect of mileage undertaken by the participants in going to and from their temporary places of work by car, motorcycle or pedal cycle. 2. Payments in respect of expenses incurred by the participants in going to and from their temporary places of work by public transport. 3. Payments in respect of expenses incurred by the participants on food and drink while they were away from home in the course of their employment. The judiciary was tasked with reviewing whether the terms of the P11D dispensation, issued by HMRC in respect of items two and three above had been exceeded or not. If this was the case, the payments should be treated as fully liable to pay as you earn (PAYE) and NI contributions (NICs). TBC had concluded that no PAYE or NICs were due as the mileage payments were exempt, and the public transport and subsistence expenses tallied with what HMRC had set out in a P11D dispensation some years previously.
Paragraphs 30 and 31 of the decision set out how the case came before the FTT at all: “30. Regulation 72 of the PAYE Regulations provided that, where the amount deducted by an employer by way of income tax from payments which it had made was less that the amount which the employer was liable to deduct from those payments, then the Respondents might direct that the employer was not liable to pay the excess as long as, inter alia, the employer satisfied the Respondents that: (1) the employer had taken reasonable care to comply with the PAYE Regulations, and (2) the failure to deduct the excess was due to an error made in good faith. “31. Regulation 72A of the PAYE Regulations made provision for an employer to request the Respondents to make a direction under Regulation 72 of the PAYE Regulations on the basis that the conditions in paragraph 30 above were satisfied and for the employer to appeal to the FTT against any refusal by the Respondents to make such a direction.” In other words, the appellants were appealing to the FTT on the basis that they had taken reasonable care and acted in good faith, and that HMRC had failed to take account of this and refused to cancel out the charges raised for the PAYE and NICs not paid in error. TBC had consulted a professional
| Professional in Payroll, Pensions and Reward | May 2025 | Issue 110 22
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