Revenue plays down temp fee VAT rumour

The government has moved to reassure regular users of temporary and agency staff that they could still avoid having to pay more VAT.

HM Revenue & Customs has been consulting on whether to scrap rules that allow employers, rather than recruitment agencies, to be exempt from paying VAT on temp fees. Experts have argued that the move would cost firms millions of pounds. The deadline for responses has now passed.

A spokesman for HM Revenue & Customs said that reports of an extra tax burden on employers of temps were misleading. He said the government was still working through comments and had not yet set a date for a decision.

A spokeswoman for the Institute of Chartered Accountants warned that if VAT became payable on the full amount charged to the client company – including remuneration, National Insurance and pension contributions – it would effectively “be a new tax on employing temporary staff”.

The CBI said if the exemption was abolished, it would be yet another example of how the government was “damaging UK competitiveness through the tax equivalent of death by a thousand cuts”.

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