The
cost of employing temporary workers is set to rise when changes to the VAT
rules come into effect later this year, warns a tax specialist.
VAT
specialist Mark Smith of Andersen says new regulations will mean that temporary
workers will be employed by their bureau rather than the bureau’s client for
VAT purposes.
Employment
bureaux will have to charge VAT on the temp’s salary, which will be a major
problem for VAT-exempt businesses such as banks, building societies and
insurance companies which cannot reclaim the tax.
“Custom
and Excise expect the draft rules to gain parliamentary approval in the summer,
so businesses which use temps should be looking at the impact and potential cost
of the changes now,” said Smith.
He
added, “If you use agency arrangements at present, these should be reviewed as
contracts may need to be renegotiated or varied. It may even be more
cost-effective to look at outsourcing or taking on permanent staff rather than
using temps.”
