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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at Budget 2008 the VAT Staff Hire Concession, which applies to supplies of staff by employment bureaux, is to be withdrawn from 1 April 2009.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Parts B and C of the Statement of Practice in Notice 700/34 Staff are unaffected and will not be withdrawn on 1 April 2009.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 As announced at Budget 2008, this concession will also be withdrawn from 1 April 2009.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
Alexander House
Victoria Avenue
SS99 1BD

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.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2009-03-23 09:24:25 in Tax Articles

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