One of the UK’s largest employment agencies has lost a Court of Appeal hearing contesting up to £158m in unpaid tax.

Employment giant Reed has been fighting a long-running battle with HM Revenue & Customs over unpaid tax on the salaries of thousands of temporary workers.

The Court of Appeal has now found in the Revenue’s favour following the appeal by Reed against an Upper Tribunal tax court ruling in April 2014.

Reed aimed to make non-taxable payments to its employed temps for travel expenses with tax and National Insurance Contributions (NICs) savings being shared between Reed and the employed temp.

The Court of Appeal agreed with HMRC’s argument that the payments were made as part of overall wages and, as a result, should have been subject to PAYE and NICs.

The Court dismissed Reed’s appeal and awarded HMRC costs.

Ruth Owen, Director General of Personal Tax, said: “This shows that we were right to challenge the complex arrangements that Reed used to try to reduce their Income Tax and National Insurance liabilities, and that we won’t hesitate to litigate cases if necessary to secure the tax due.”

Reed said: “We are extremely disappointed by the decision of the Court of Appeal in this case, which involved complex issues and which we lost on a technical point on the wording of our contracts with our temporary employees.

“We stress that this is a historical tax dispute, covering a period from 2001 until 2006 and will not have an impact on our clients or our temporary employees past and present. We will be working with HMRC to take the matter forward.”