VAT: Withdrawal of Staff Hire Concession

Members’ attention is drawn to one of the 2008 Budget changes which will take effect from 1 April 2009.

Currently employment agencies providing temporary workers are able to exclude the wages element from the supplies they make, thus only accounting for VAT on their margin. This was possible under a long standing concession but it has been concluded that the concession has no basis in UK or EU VAT law, and thus it had to be withdrawn.

Withdrawal of the concession will not impact businesses which are able to fully recover their VAT inputs. However, for those who are only able to partially recover VAT, this is a potentially significant change which will add to the cost of using temporary staff from an agency.

Further information can be found on the HMRC website:

Shortcut:
- www. hmrc.gov.uk
- Search box – enter: “VAT: Withdrawal of Staff Hire Concession”
- View Technical Note

No doubt existing employment bureaux will also be able to furnish members with further information.

See Also: Advice to Members Re VAT Rate Change