September 2008


VAT changes will prove costly for recruiters

The Recruitment and Employment Confederation (REC) has expressed fears that the cost to employers of imposing VAT on the wages of certain temporary workers will be at least £400 million, and not £125 million as stated by the Treasury.

The government announced in the last budget that the staff hire concession to employment businesses, which has been in force since 1998, will be withdrawn in April 2009. At present, an employment bureau supplying staff to a temporary business charges VAT only on its commission. If it pays the salary of the individual and invoices this onwards, this element of the invoice can be treated as a ‘disbursement' and VAT need not be charged. From next April, VAT must be charged by the employment bureau on the whole invoice, including the element relating to the salary.

This does not affect businesses hiring temporary staff which themselves make taxable supplies, as they can reclaim any additional VAT charged to them. There is a cash flow issue but nothing more. However, it does affect businesses which make exempt supplies. These include charities, care homes, medical practices and banks. Therefore if one of these organisations hires through an employment bureau an individual working as a temporary charity or care worker, a locum doctor or bank cashier, the additional VAT charged on the person's wages will be irrecoverable.

The REC is attempting to force a re-think by the Treasury, supported by the English Community Care Association, the Charity Finance Directors Group, the CBI and the British Bankers' Association. But a spokesman for the Treasury says: “This concession was always a temporary measure introduced to correct market failure. It has no legal basis.”

UK Training's seminar, The Essentials of VAT, will help people who are involved in the preparation and maintenance of records for VAT purposes. It will help them understand the implications of VAT and the importance of keeping proper records to collect the necessary information to complete VAT returns correctly. The course examines the rules and regulations of VAT and clearly demonstrates the procedures and controls to be applied to ensure the timely submission of complete and accurate VAT returns. The course discusses the powers of the Revenue and Customs and the penalties which they can apply if VAT returns are incomplete or inaccurate, or submitted late.

Delegates who attend this seminar will also receive, free of charge, a copy of the book The Authoritative and Complete Guide to VAT by Peter Hughes, a CD-ROM containing many supporting materials and a one-year subscription to The VAT Resource Centre.

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