Travel & Subsistence Scheme run by Employer, pre-contractual misrepresentation , fee not negotiated, can i sue ?

[quark2009]

hello there.

 

maybe you guys could at least put me into a right direction.

 

my Employer has been running this Travel & Subsistence scheme which allows employees to claim the expenses and pay less tax, thereby saving money to the employee. However, the benefit split is very unfair 15% to the employee only and 85% to the employer. when we entered into the scheme all the employer told us is that we would be better off when on the scheme and it is true that we do earn a little bit more as the tax paid is much less but the employer never negotiated any fees and so as a consumer of such service in the Tax area i think the employer should be much more transparent.

 

however, i later did further calculations. and it transpired that the employer saves a lot by paying much less of Employees National Insurance and less of Employers National Insurance , which means that we get 15 pounds but the employer takes 75 pounds , and this 70 pounds should have otherwise gone to the total pot of Employee's NIC which is connected to the employee's State Pension , Unemployment Benefits, other benefits and so on, in other words after a full and careful calculation the scheme is actually misleading and in reality is not beneficial at all !!! and is thus either a fraud or a gross negligent misrepresentation, deceit, theft whatever you want to call it.

 

naturally it is very frustrating to enter into any disputes with your employer, but i am so ****ed off about it that i feel like i have no choice because this company has done a lot of nasty things, and they have been evading my questions about this scheme for like 4 years.

 

now questions are:

 

what do i do ?

can i sue them?

if yes can i also sue them for examplary damages as this practice is very widespread.

am i a consumer of a service. this is sort of a Tax area and thus possibly i am a consumer of a Tax Consulting Service where a fee should have been negotiated.

also , as an employee, it is an employee and Employement relationship and thus there must be an implied trust.

so we sort of trusted that this scheme is genuinely good for us but in reality it is a rip off, it is like telling a granny that you will paint her a fence whilst you steal half of her fence.

 

maybe someone can recommend a cheap but good lawyer or good legal aid lawyer.

any advice would be very much appreciated.

 

many thanks

[steampowered]

I'm not sure you correctly understand the concept of national insurance. It is very common for people to think it is a "pot" but that is not how it works. It is a tax.

 

The state pension is based on the number of years you paid NI - you do not get any greater amount depending on how much NI you paid each year. Broadly speaking you get the full state pension if you paid NI for 30 years. I'm not exactly sure how JSA works but I think its similar (i.e. once you have the qualifying criteria for contribution-based JSA, you get a set amount. You do not get more just because you have paid a high amount of NI).

 

Answering your specific questions:

- I don't think you can sue them. It is not illegal for the employer to try and pay less NI (remember the employer has to pay NI as well as the employee). While the employer could have shared the benefits of this scheme with employees more fairly, it is not clear to me that you have lost out as a result of the scheme.

- I don't understand what you are saying about the 'Tax Consulting Service'. Is this something you have to pay for?

- You generally can't get legal aid for employment disputes.

- English law does not allow for exemplary damages in this kind of situation.

[quark2009]

thank you for your reply SteamPowered - you said you are not sure about JSA, therefore i might still have a case here with regards to specifically NI - as for Tax ... and answering your question about Tax Consulting. i just called it consulting because i am trying to analyze the reality of the situation and the relationship, i am trying to see if we have a case here. the reality is that we entered into an agreement with our Employer that (quoting) "Employer will make us better off whilst being on this scheme", so the latter agreement is sort of true (although given JSA and other benefits issues, i have doubts as to whether this is true ). However our employer never told us that they will be taking a massive fee, which they are sort of hiding because they keep denying that they are benefiting from this scheme. but if you properly examine the payslip, you can clearly see that out of the saving that the scheme generates they give us £15 and the keep £40. so in other words if we claim these expense on the Annual Tax Return our-selves at the end of the year we would get much more money than if our Employer does it for us. Now, lets rephrase it for better understanding. I did the calculations of Payslip Net Pay with the scheme and without the scheme and compared with what our actual Net Pay with the scheme and the difference is about £40 per month (this varies with the expenses and this is without taking into consideration NI.) . Now question is where is the £40 missing ? the Employer says that they do not benefit from it and they tell us that the calculation is very complex and they cannot provide this to us, now this sounds pretty suspicious. Now, i am trying to analyze the situation from a legal point of view. Do we have an implied terms of Trust between Employer and Employee, has this implied term been breached by the deception and misrepresentation when entering into the scheme. Because we were never told that the Employer will take a fee for that. Also, are we considered to be consumers of this service? If yes then what regulations have been breached? I mean that the Employer offered us a service (this Travel and Subsistence Scheme) thus, are we considered to be consumers of this service? Also, as this service is a Tax Service , should there be any rules, specifically, regulations as to the provision and negotiation of such service, from reading the Tax Consulting code of conduct there should be fees disclosed, which were never disclosed. Also, if we are consumers of any service, should the fees have been negotiated and disclosed as a part of the Contract agreement. Many thanks

[steampowered]

I don't think there is any misrepresentation here. The employer told you there were benefits to you from doing this, and there are benefits. I am sure the employer keeps most of the tax saving but unless they told you differently there is no misrepresentation. I'm not aware of any legal obligation on the employer to disclose the financial terms of the scheme before signing you up. I don't know the details of the scheme, but if the employer is still providing the benefits provided for in your employment contract I guess they could move employees onto the scheme without telling them or seeking their consent at all.

 

Regarding the tax consulting thing, it is common for employers to use schemes like this in order to save on national insurance ... my employer does it too. I'm not sure what fees there would be other than general admin fees associated with running employee benefits, if this is outsourced I imagine it is run by an employee-benefit provider rather than a tax consultant.

 

Regarding JSA, as long as you meet the minimum contributions for the contributory JSA element it is a fixed amount ... someone who earns 200k a year and paid thousands of pounds a year in NI won't get more JSA than someone who earns 20k a year.

[quark2009]

Thank you for your reply SteamPowered.

 

Having read the legal articles and cases that relate to the situation i still think that there is a misrepresentation here or some sort of wrongdoing or fraud. Imagine you go to an old granny who trusts you just because you are her nephew and you promise her to paint her fence , and you do paint it but you use a lot of her paint to paint your own face like x5 times the size. Now, isnt that fraud ?

 

If there hasnt been a precedent, it does not mean there are no problems here.

 

What is your background, im just trying to figure out how much legal experience you have.

 

This is not an employees benefits sheme and it is not in the employee contract. And absolutely yes, employer must ask permission from employees to enter them into such schemes.

 

Can anyone suggest a cheap lawyer who would look into that. I would prefer a lwayer than my union. If no other choice then i will have to use the union.

[honeybee13]

Can anyone suggest a cheap lawyer who would look into that. I would prefer a lwayer than my union. If no other choice then i will have to use the union.

 

Hello there. It's against site rules to recommend lawyers, sorry You could look on the Law Society website to see who knows about this subject locally, and then ring them up to see if they can help.

 

My best, HB

[honeybee13]

PS Is there any chance you could edit some paragraphs into your post please? Not everyone here can read a wall of text and make sense of it, myself included - it does my eyes in. The easier you make it to read, the more advice you're likely to receive.

 

HB

[steampowered]

Hi max2009,

 

Let me clarify the point I am trying to make on misrepresentation. I point you to the definition at http://en.wikipedia.org/wiki/Misrepresentation_in_English_law - misrepresentation is a false statement of fact or law that is relied on by the other party in entering a contract. As you will see from the 'silence' section of that article, as a general rule failure to disclose something does not count as a misrepresentation.

 

In the example you give there is a clear statement that you will paint the granny's fence. In this case I am not able to identify any specific false statement made by the employer. I'm not saying the statement doesn't exist, I'm saying you have to identify the false statement before you can move forward with a misrepresentation claim.

 

Regarding my background, it is against site rules for people to hold themselves out as legally qualified. You will need to come to your own conclusions about my legal knowledge based on my post history. If in doubt then yes of course it is a good idea to engage an insured professional or check with your union, and provide them with the full details of the scheme.

[quark2009]

Hello everyone,thank you for all your replies.Honeybee - im sorry about my post without paragraphs, i did do the paragraphs and tried to edit it many times but your site did not allow it or maybe there was an error. i always use paragraphs and clear structure. will try to repost it here again.

[SuperVillain]

HMRC don't appear to take issue with this.

 

http://www.hmrc.gov.uk/incometax/relief-travel.htm

[quark2009]

Steam - thank you for your reply.

 

this case is quite complex and might probably be the first one of its kind if we get to the court, but most likely they will settle outside as the precedent will have massive implications just like PPI did in recent years.

 

So, so lets look at it much closer...

 

if you have a legal background then lets talk about the following issues, please try to look at them as if a Court Judge would:

 

1. implied terms: in the relationship between Employer and Employee - there is an implied term of Trust. as opposed to a B2B / arm's length transaction. Thus this case should not probably be looked at as if it is a commercial transaction / contract. because if it was a normal arm's length transaction then people would not

 

2. Tax Advisory. i think this area has some regulation. Does it apply here. Normally Tax Advisors are regulated. can we argue that in this case our employer acted as a Tax Advisor who should have negotiated and explicitly disclosed their fee.

 

3. Persistent denial of the benefit. we contacted employer on many occassions by many staff members and the employer has always denied that they are getting a benefit from the scheme and that they are charging us a fee. So this is clearly a misrepresentation.

 

4. The employer has persistently evaded answering our questions about the details of the calculation of the scheme. we are always told that this is too complex to explain. this is a clear sign of either a negligence or a bad due dilligence or a simply another example misrepresentation.

 

5. Persistent automatic enrolment upon employment. Often without prior consent of the other party (employee).

 

6. in many cases the employer has actually said: “you will pay less”, it is only in some instances that they said ”you will be better off” and only after enrolling me on the scheme that they told me “you are better off, so why are you complaining ?”

 

7. abuse of position / trust as an employer.

 

8. few relevant points found here in Hugh Collins (of LSE) / private redress...

http://www.consumerfocus.org.uk/assets/1/files/2009/11/hughcollins.pdf

 

points such as those following in below paragraphs...

 

- what about Consumer Protection from Unfair Trading Regulations.

 

9. in Services Contracts, implied duty of care and skill, and implied duty to disclose information in some cases.

 

10. Undue influence, the employer is now running 30 min sessions to explain the scheme, everyone i spoke to, has an impression that they are being sold this service, prospective employees are told of great benefits of the scheme.

 

11. Misleading, though literally true statements. (this part to be continued, from CPUR 2008)

 

12. Misleading - "this is a government run scheme" , it is not actually, the scheme is allowed by HMRC, ( although now it is disputable by government but that is a totally different issue ) what is relevant however is that the scheme is actually either run by the Employer or the outsourced service provider or a combination of both. but in any case it is not run by HMRC, thus in this case this statement appears to give a false assurance and thus pushes a consumer to make a decision that would not be otherwise taken.

 

13. what about these precedent cases, they are not precise situation of ours but there are interesting and closely related:

 

- Cordant Group vs Secretary of State

remarks made by the judge are interesting , "inequitable benefit split" , even though the judge would not normally rule / judge based on whether something is fair or not, however such comments should have a great merit in Consumer and Unfair Trading situation.

 

 

- case at Employement Tribuna = Guards vs VSG Security, this is close to our situation, but difference is that it has TUPE aspect to it, which is not our case. and i am not sure yet how much importance this aspect played in the ruling.

 

 

14. what if i report this to Office of Fair Trading, what can i get out of it, can i get them to enforce the claim ?

 

there are more aspects and evidence to add but i dont have much time now, will get back here.

 

to be continued.

many thanks for any input.

[quark2009]

to add in the para #1 above:

... then people would be much more careful and may have chosen to decline such a contract / service , or in this case such a scheme.

 

i need to check Tax Law as well, with particular attention to Asset / Liability aspects , transfer of such, Tax Advisory, related fees, and so on.

 

for those who are looking on this post, please check the previous big post, as this one is just the correction of the previous post.

thanks

[steampowered]

1. Yes, there is an implied term of trust and confidence in all employment relationships.

2. I can't really see how the employer would be acting as a tax advisor. I'm also not sure that tax advisors are required to disclose their fee. Certainly for years and years insurers and banks did not disclose hidden commissions and that has been OKd by the courts (n.b. fiduciary duties are stronger duties than the implied term of trust and confidence).

3. Stating that the employer does not receive a benefit could be a misrepresentation. However, there would be no damages for that misrepresentation since the employee has not lost out (i.e. it only matters what the employee was promised). In any event, only misrepresentations made before you agreed to enter into the scheme would be actionable - misreps made late are not relevance since they did not impact the employee's decision.

4. Saying the scheme is too complex does not seem to be a clear statement of fact and I doubt whether it could ever constitute a misrepresentation. It may well be bad management or laziness but this is not illegal.

5. Why would the employer need the employee's consent to enrol them in an employee benefit/expense scheme? I'm not following why the employee's consent is required.

6. I don't follow

7. Not sure

8. I'm not sure what paragraphs of UTCCR would be relevant. This regulation is normally used to challenge the enforceability of terms in a contract. Here I am not sure there are any particular contract terms to challenge.

9. You are referring to s13 Supply of Goods and Services Act 1982. Not relevant here as your employment contract is not a contract for the employer to supply a service to you.

10. Hmmmm interesting point, though I'm not sure this would fall within the categories of special relationship recognised by case-law for the purpose of undue influence. Its also not clear to me what the remedy would be.

11. I can't see how this is relevant here - note the requirement from paragraph 3 of CPUR - 'it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product.'

12. Sure, does it matter?

13. Cordant v Secretrary of State is a completely different area of law. It is judicial review, which is when someone wants to challenge the actions of a public body on the grounds of irrationality. I'm not sure fairness considerations are relevant here.

The VSG security case is interesting, I haven't read the full thing but it seems to relate to a situation where the employees were intially on a scheme which allowed them to keep the full tax benefit, and were then moved to a scheme which charges them, but this was seen as a change in their employment contract which wasn't approved hence an unlawful deduction of wages. You could try the same route here, but the problem is (1) it sounds like you guys consented to the change and (2) if you were in the same position before the scheme you might struggle to prove loss.

14. I can't imagine the OFT would be interested.

 

While you have clearly thought about this very hard and considered it from many different, I am still struggling to see a claim here. Although I haven't done the kind of research necessary to dismiss this completely.

 

For me the three big problems with your claim are (1) demonstrating that employee consent is needed for this scheme (I'm not sure why it would be), (2) demonstrating that the employer misrepresented the scheme to you (its not obvious to me that they did) and (3) demonstrating that employees suffered loss as a result (if you haven't suffered any loss then the civil courts and Employment Tribunal cannot award you a substantial money remedy).

[Emmzzi]

Is this a bog standard expenses reclaim scheme working through an agency by any chance?,

[quark2009]

Emmzzi,

 

yes, it is that kind of a scheme, very unethical and very unfair, hence im trying to figure out how to sue these people's bums, there must be a way, if it does not work via a court, maybe MPs can do something about it, to me it is a clear theft !!!

[quark2009]

Hello Steam,

 

Many thanks for your reply.

 

Lets get the definitions sorted first.

 

This scheme is not the benefit scheme, in other words this is not something like a benefit that a company provides you with, such as a company car, pension or health insurance.

 

That is why I need to sieve through the Tax Law to find the aspects of assets / liabilities

 

Related to the above subject and interestingly enough, (in this case as well), and as it is in usual tax matters, there is no Transfer of Liability, which means that if a certain amount of Tax is underpaid then an employee is liable to pay it back to the HMRC, from this, it should therefore follow that the overpaid tax is an individual’s Asset, similarly an underpaid tax is the Liability.

 

Therefore, one, regardless of the position, and especially if it is an employer, who has a duty of care and is entrusted with any such matter should not take someone’s asset without an individual’s explicit permission, even if an individual agreed to some vague scheme where you are told “you will pay less tax”. There can be a reduction of tax, however if not all tax is given back to an individual then the asset has been misappropriated without the owner’s explicit permission, in other words, stolen. So , here you go, give me a defence here.

 

As said above this scheme is not a bona fide provision of a benefit which is intrinsically an Asset of an Employer that an Employer wants to give to an employee free of charge, just like normal benefits are. This is simply a scheme whereby an employer is claiming our expenses on our behalf, in exactly the same way as a Tax Advisor or an Accountant would. Therefore, an employee is a client to that scheme, in other words an employee is a Consumer of that scheme. Therefore a range of Consumer Legislation should apply in this case, for example – Consumer Protection from Unfair Trading Regulations 2008, and its associated compensations. What do you think?

 

And therefore yes, Office of Fair Trading should definitely be interested.

 

I think that it is clear that we are consumers of this Tax Saving Service, whatever you want to call or disguise this scheme as. What would be your defence here. Can you prove that we are not Consumers here.

 

 

Chartered Institute of Taxation, in its Professional Rules and Practice Guidelines, says – 8.1.1. “Before undertaking any work on behalf of any new or existing client, a member should ensure that the client clearly understands the basis on which fees will be charged and how expenses incurred on behalf of the client will be treated.“

 

We now should also establish who exactly provides this scheme and whether those who run it, should abide by these rules. To me , it is clear that they should, even if they are not members, because the effect of running this service is clearly translated into a provision of Tax Service / Advisory.

 

Anyone who provides accountancy or tax or bookkeeping advice is known as “Accountancy Service Provider”. The regulations require such providers to be registered with HMRC or with supervised professional body, and to abide by their rules.

 

I will get back to you on with regards to other aspects you raised.

 

Thanks

[Emmzzi]

Any time I have done agency work I have had to sign something to opt in. And could choose to opt out. It's been in the paperwork when I register for a job.

 

HMRC seems to be doing a better job than suing, however. So watch this space.

 

http://uk.practicallaw.com/3-517-4673

[quark2009]

i heard about this case, i think this is slightly different matter, although related to effectively the same scheme, i think this case is about ... HMRC thinks the scheme run by Reed is claiming tax back for expenses that are not tax-deductible (tax-allowable), and Reed obviously did not like it and appealed, and the judge told Reed to p***s off. i wish the Judge also asked Reed to reimburse the employees .

 

i heard that this happens often with other companies.

[Emmzzi]

however.

 

your issue is that you are signed up to a scheme like any other contract. you don't like it, negotiate, or find a new employer with a contract you do like.

[quark2009]

that is what they say, but we will see if who is right and who is wrong.

 

this is not like any other contract, and this contract has not been properly negotiated or agreed. and i think suing is exactly what we need to do to these big fat cats, i would love to drag their bums to the court

[Emmzzi]

well, good luck. I think our chances are slim but if you have plenty money for solicitors it'll be an entertaining read!

[steampowered]

Related to the above subject and interestingly enough, (in this case as well), and as it is in usual tax matters, there is no Transfer of Liability, which means that if a certain amount of Tax is underpaid then an employee is liable to pay it back to the HMRC, from this, it should therefore follow that the overpaid tax is an individual’s Asset, similarly an underpaid tax is the Liability.

 

I don't think this is true. My understanding is that employers are liable for underpayment of tax if the proper amounts were not deducted through the PAYE system.

 

I also don't see how there could be an overpayment or underpayment here. This is a case of less tax being paid through tax structuring, there is no overpayment or underpayment.

 

Also make sure you fully understand which taxes we are talking about. Employer's national insurance is separate to the employee's income tax and NI. The employer's national insurance must be paid by the employer, it is a liability of the employer never a liability of the employee and does not show on your payslip. If the employer is saving on its own tax obligations I don't see how you could claim an entitlement to this.

 

Other than that I don't have anything to add to my last post. I still struggle to see a legal claim here but wish you good luck.

[Derwent]

I really can't see why the OP thinks he has a case here. This is a bog standard salary sacrifice scheme, used by many employers in the UK to reduce their NI liability. Under this scheme the employee will be no worse off than under standard PAYE terms and so what exactly would the OP be claiming as he has suffered no loss ?

[SuperVillain]

Exactly Derwent, I agree it seems hard to quantify the loss.

 

Although it seems the OP thinks he can put a figure on it if he sees the calculations which the company aren't showing him because they state they are too complex.

[quark2009]

That is the problem that the whole industry is involved in it, some are ethical and give the benefit / tax saving fully but some are exploiting conmen. And thats what we have to rectify whether by a precedent case or by legislation. This is absolutely outrageous.

 

Putting a figure on ... its very easy, i am part-qualified accountant and i can see it black and white. It is also quite clear that some Employers deliberately make the payslips look confusing and the majority of people cannot understand what is going on but to me it is very clear. I dont even need to see the calculations i just wanted to see what card the employer would play and the played "dont know what you are talking about, be happy with what you ve got" kind of card, well thats a good evidence for me thank you.

 

Go and see the Mirror blog and the case mentioned above, Mirror nicely and rightly calls them Paroll Parasites.

 

Derwent,

you are clearly missing the argument but maybe you are one of those Employers

 

And we did not even get to Employer's NIC argument , as i said above this aspect needs to be investigated further and even that part might have to be compensated depending on the argument , i need to research the effects of underpayments.

 

As for Tax and Employee's NIC then the case is clear - it is a theft pure and simple, it is just a matter of putting the argument correctly and showing relevant evidence.

 

Steam,

You missed the point on overpaymen / underpayment and Asset / Liabilities. Read through again i just dont have time to go through in details now, will get back to you later. Briefly ... if an employee has Allowable Expenses that have not been claimed then this results in Tax Overpayment.

 

Yes i do understand NIC quite well , it is the legal aspects of this matter and Tax Law and some other bits that i need to dig up, it is a pity that we dont have a widespread mass tort practice like in US , maybe i should start it

 

I just now have to find a good Litigation lawyer.

 

Many thanks