Tax & Accounting News

Temporary staff VAT blow

03/04/2009

Employment businesses will have to charge VAT from 1 April 2009 on all supplies of temporary staff after the government refused to delay the axing of a special concession.

However, there are specific exemptions – for example, where temporary workers provide care to people in their own homes – VAT will now have to be levied.

The move was originally announced in the 2008 Budget but there had been pressure from Recruitment and Employment Confederation (REC) and other business groups for the government to delay the move until the economic climate has improved.

The concession, which was originally introduced in 1998, meant that agencies supplying staff to employers who are unable to recover VAT could exclude VAT from the wages element of their charges. The REC estimates that the concession saves employers who rely on the flexibility of temporary workers around £400 million a year.

The government is dropping the concession because of changes to legislation governing employment businesses and because HM Revenue & Customs believe it cannot be justified under UK and EU law.

Sectors that will be hit by the scrapping of the concession include charities, education, health care and financial services.

 

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