Tax Update (March 2009)
VAT Concession removed
In his 2008 Budget the Chancellor announced the removal of the
VAT Staff Hire Concession. This means that from the 1st of April
2009 all businesses making supplies of staff as a principal will
have to account for VAT on the full value of their supply.
Any employment bureau that has not utilised the concession and
has accounted for VAT on the full value will not be affected by the
change. Neither will those seconding staff for no profit or placing
disabled workers under the sheltered placement schemes. Those
acting as agents for VAT purposes likewise will not be
affected.
A business makes a supply of staff for VAT purposes if it
provides another person, for a consideration, the use of an
individual who is contractually employed by the supplier, or is a
director of the supplying company. The key factor is that the staff
are not contractually employed by the recipient company, but come
under the direction of that company.
The concession has been withdrawn following an extensive review
which concluded that the concession is unsupported in the EU and UK
law and is therefore illegal.