press release
Law firm warns businesses over looming VAT changes for temporary staff
4 March 2009
Hard pressed Midlands businesses have been
dealt a further blow, claims Birmingham law firm Browne Jacobson,
with the removal of a VAT concession that may make the hiring of
temporary staff more expensive.
Due to be scrapped from April 1 ’09, the staff
hire concession allows employment agencies to charge VAT solely on
their commission for temporary staff, rather than the workers’ full
salary. Tax experts at Browne Jacobson are concerned that the
withdrawal of this concession will lead to higher costs for several
businesses that use agency staff.
From April 1, 2009 businesses will have to pay
VAT on the full salary of temporary staff as well as the agency’s
commission. The impact for many businesses should hopefully only be
cashflow, where they can recover their VAT from HM Revenue &
Customs.
However, this could be a real cost as well as
just a cashflow issue for those businesses which cannot normally
recover their VAT from HM Revenue & Customs, for example those
operating in VAT exempt sectors such as healthcare, banking and
finance, insurance, and education. These businesses will soon have
an extra 15 per cent cost when taking temporary staff from
agencies, increasing to 17.5 per cent at the end of 2009.
Andrew Noble, head of tax at Browne Jacobson,
commented: “By withdrawing this concession, which has been in
place for over 10 years, the cost of taking on temporary staff is
sure to rocket for many businesses. Employment agencies may also
take a hit as fewer temporary staff are taken on because of
businesses restructuring their employment strategies.”
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