Administering salary sacrifice was not an economic activity: Pertemps Ltd [2019] UKUT 234 (TCC)

The Taxpayer administers a travel and subsistence salary sacrifice scheme for its employees and makes a flat rate deduction per shift for so doing. HMRC assessed for VAT on the basis that the deduction was consideration for a taxable supply by the Taxpayer to its employees. The First Tier Tribunal (FTT) held that, whilst there was a supply for consideration, the Taxpayer was not carrying on an economic activity (art 9 Principal VAT Directive) and no VAT was due. The Upper Tribunal agreed that there was no economic activity, but also held that there was no supply for consideration, as the Taxpayer was simply paying its employees in accordance with their contracts and the tax legislation. So the UT dismissed HMRC’s appeal. Employers may wish to review the VAT treatment of similar schemes.