Recruitment industry leaders are meeting with the government this week to thrash out a possible deal on tax changes that could add £400m to the cost of hiring temporary workers.
The government’s decision in the Budget earlier this year to scrap the VAT staff hire concession from April 2009 will potentially add huge costs to taking on temps at a time when businesses and the jobs market can least afford it.
The concession was always intended as a short-term measure, but officials from the Recruitment and Employment Confederation (REC), which represents employment agencies, are meeting with HM Revenue & Customs to discuss the changes.
The REC has estimated that removing this concession will add £400m to employer costs and could ultimately result in thousands of temporary job opportunities being lost.
REC chief executive Kevin Green said: “The net result of having to add VAT to the overall cost of taking on temporary and contract workers is likely to be less flexibility, higher costs for UK businesses and fewer jobs available.
“We are looking for constructive discussions on how we can avoid the fallout from the added costs that the removal of this concession will lead to, at a time when the UK economy can least afford it.”
The removal of the concession will have an impact in sectors which are not able to reclaim the VAT charged on the wages of temps, including healthcare, social housing, financial services and further education.