VAT Staff Hire Concession is ending
The VAT staff hire concession will be withdrawn with effect from 1 April 2009. This withdrawal which was announced as part of the 2008 Budget will impact the VAT cost of a significant number of businesses. The concession allowed employment agencies supplying their own staff to charge VAT only on their profit margin rather than on the full value of the supply (i.e. salary and other similar payments). The concession could also be used by any type of business which supplied staff.
Businesses that hire staff and are unable to recover all or part of the VAT they incur will be affected by this withdrawal. Examples of businesses that will be affected are those in the financial services, healthcare, education and charity sectors. This is because they will now be charged VAT based on the full value of the supply.
The withdrawal of this concession stemmed from a review in 2006 which could find no support for it in EU or UK law. In addition the use of this concession by certain taxpayers formed a component of certain tax avoidance schemes.
Invoices which cross the threshold during the time when the concession is withdrawn may be apportioned in relation to the pre and post 1 April 2009 date.