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Recruitment Sector Warns of Job Cuts Following Withdrawal of the Staff Hire Concession |
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Andrew Needham, Director of VAT Specialists Ltd, comments on the withdrawal of the staff hire concession. End of a long-standing concessionFurther to HMRC’s original announcement in Budget 2008, and the reminder in Revenue & Customs Brief 08/09, the long-standing Staff Hire Concession was withdrawn from 1 April 2009. It was introduced in 1997 as a temporary means of dealing with the distortion caused by the Reed Personnel Services case. However, such was the popularity of the concession amongst hirers of temporary staff that could not reclaim VAT, (e.g., charities, banks, care providers), that it lasted for 12 years. How it workedThe concession worked by allowing temp agencies only to charge VAT on their margins, not on the wages and other statutory costs of the temps. The withdrawal means that VAT is now due on the full hire charge, and increases the cost of hiring temporary staff in those sectors. UnsupportedFollowing the Budget 2008 announcement, intensive lobbying began to keep the concession, led by the Recruitment & Employment Confederation (‘REC’). Representations were made by the REC at the highest level to the Treasury and the Department for Business about the potential impact of this change to the charging of VAT. However, as HMRC stated in Revenue & Customs Brief 08/09, the concession was found to be unsupported in both UK and EU law, and for that reason alone, could no longer be maintained. Deep concernOn 31 March 2009, Kevin Green, Chief Executive of the REC, made the following statement on the REC website:
It should be noted that two related concessions for secondment of staff at no profit, and the placement of disabled staff under the ‘sheltered placement scheme’, are unaffected by the withdrawal, and remain in place (see Notice 700/34 ‘Staff’ for further details). CommentAdvisors of businesses operating in the affected sectors should ensure that their clients are aware of the withdrawal and its financial impact.
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About The Author  Andrew Needham BA CTA is Director of VAT Specialists Limited and a leading author and adviser on Indirect Tax matters. Andrew has a degree in Law from UCNW Bangor and is a Chartered Tax Adviser. Andrew has over 20 years' experience in VAT having spent 7 years in HM Customs & Excise, firstly as a VAT inspector, then as a departmental trainer, and finally in a headquarters policy unit dealing with the introduction of the EU single market. After leaving Customs he joined Deloitte & Touche as a VAT consultant in Liverpool and then Manchester, where he qualified as a Chartered Tax Adviser. Andrew then moved to London where he worked on formulating indirect tax planning ideas, writing articles for tax publications, and was author of Deloitte’s Weekly VAT News. From Deloitte’s, Andrew moved to Ernst & Young in Manchester as a senior indirect tax consultant, where he managed the indirect tax affairs of several multi-national companies. In 2001 Andrew left Ernst & Young to form VAT Solutions (UK) Limited with a co-Director. In September 2009 Andrew formed his own VAT consultancy practice, VAT Specialists Limited. Andrew is VAT adviser to the Forum of Private Business and represents them quarterly on the Joint VAT Consultative Committee. VAT Specialists Ltd (E) andrew@vatspecialists.net |
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Article Added Saturday, 18 July 2009 |
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