VAT changes push temp costs higher

The cost of employing temporary workers is set to rise when changes to VAT
rules come into effect, warns a tax specialist.

VAT specialist Mark Smith, of Andersen, said new regulations will mean temporary
workers will be employed by their employment bureau rather than the client for
VAT purposes.

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 expects 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.

"If you use agency arrangements at present, these should be reviewed as
contracts may need to be renegotiated. It may even be more cost-effective to
look at outsourcing or taking on permanent staff rather than using temps."

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