Currently staffing agencies, where supplying temporary staff, are obliged to invoice their clients for their entire charge inclusive of the workers pay. VAT is chargeable on the full sum. Under the concession, which was abandoned in April 2009, staffing agencies were able to invoice their hiring clients with no VAT charged on the value of the workers pay. This was particularly helpful for those hirers who were VAT exempt and could not offset their VAT payouts against VAT inputs.
VAT exempt organisations include charities, public sector organisations including the NHS, care sector operations and local authorities, all of whom are currently hard pressed for funds. ARC argues that a reinstatement of the concession would provide much needed support for those sectors saving 20% of the temp pay rate as well as reduced administration and restore some more flexibility which in turn helps both workers and businesses.
ARC’s proposal is at a time when it is widely reported that the Chancellor is considering reducing VAT and income tax.
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