HM Revenue and Customs Brief 08/09
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Issued 19 March 2009
As announced at Budget 2008 the VAT Staff Hire Concession,
which applies to supplies of staff by employment bureaux, is to be
withdrawn from 1 April 2009. This brief is intended to remind affected
businesses of its withdrawal and to set out the VAT treatment that
should be applied from 1 April. VAT Information Sheet 03/09 issued on
19 March 2009 contains more detailed guidance.
The concession is set out in Part A of the Statement of
Practice in Notice 700/34 Staff and in Business Brief 02/04. It enables
businesses making supplies of their own staff to exclude from the value
of their supply the remuneration element and any PAYE (Pay As You
Earn), National Insurance Contributions, pension contributions and
similar payments relating to the worker provided such payments are made
directly to the worker by the hirer, or a payroll company separate from
the employment business supplying the staff. Such employment businesses
have thus charged VAT solely on their profit margin and not on the full
value of their supply.
Parts B and C of the Statement of Practice in Notice 700/34
Staff are unaffected and will not be withdrawn on 1 April 2009.
Business Brief 10/04 allowed employment bureaux that did not
fall within the conditions of the Staff Hire Concession, because they
made supplies of staff using self-employed workers, to choose whether
to act as agents or principals for VAT purposes until the review of the
Staff Hire Concession was completed. As announced at Budget 2008, this
concession will also be withdrawn from 1 April 2009.
From 1 April 2009, in line with normal VAT principles,
businesses making supplies of staff must charge and account for VAT on
the full value of their supply. The correct VAT treatment following
withdrawal is as follows:
If you act as a principal (eg
employment business) in making a supply of staff using either:
- your own employees (which includes a director of your
company) engaged under a contract of services
- self-employed workers who make their supplies to you under
a contract for services
then VAT will be due on the full value of the supply (not just
the profit margin).
If you act as an agent in
providing introductory services of finding employment for workers or
workers for your client and the workers enter into a direct contractual
relationship with the client, who pays them, then VAT is due on your
intermediary service only (based on your commission received). Such
supplies are unaffected by the Staff Hire Concession and so will be
unaffected by its withdrawal.
If you are making a supply of services other
than staff, for example, supplies of care services, then
your supply may qualify for exemption from VAT. See Notice 701/57
Health professionals for more information and the qualifying criteria.
If your supply is of services other than staff it is unaffected by the
Staff Hire Concession and so will be unaffected by its withdrawal.
If you are unsure of the correct VAT treatment of your
supplies you should consult Notice 700/34 Staff and Notice 701/57
Health professionals. You may also contact our National Advice Service
Helpline on Tel 0845 010 9000, by email: National Advice Service
Helpline, or in writing at:
HM Revenue & Customs
National Advice Service
Written Enquiries Section
Please include your VAT registration number and the name and
address of your business in any correspondence. If you are not VAT
registered please include your name and address.
Our Clearance procedure is also available in which we will
give our view of the correct tax treatment of your transaction. You can
use this procedure where you have demonstrated that there is material
uncertainty and that the issue is commercially significant. For further
guidance on this see Clearance service for businesses - how to get
certainty on significant business tax issues
Accounting procedures around 1 April 2009
The normal time of supply (tax point) rules will apply.
However, in respect of supplies spanning 1 April 2009, the Staff Hire
Concession will be available to the extent that the service is
performed prior to 1 April 2009. For example, if you raise an invoice
or receive a payment on Friday 3 April, the concession will by then
have been withdrawn. But you may, if you wish, account for VAT on the
basis of the value of the services actually performed before and after
the withdrawal of the concession, ie you may apportion the
consideration for the services between:
- those services performed before 1 April, in respect of
which the Staff Hire Concession is available
- those services performed on or after 1 April, in respect
of which the Staff Hire Concession will no longer be available
About the Author
© Crown Copyright 2009.
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date at time of reading.
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Article Published/Sorted/Amended on Scopulus 2009-03-23 09:24:25 in Tax Articles