HMRC have warned that their view of the VAT treatment of supplies made by employment bureaux has not changed as a result of the First-tier Tribunal’s recent decision in Reed Employment Ltd v HMRC (TC 1069, LON/2004/0130). Earlier this month Recruiter reportedthat some agencies had begun to charge VAT ‘on the margin rather than the full amount of their invoices’ on the basis of the decision published in April.
Recruiter quoted Kevin Barrow, a Partner at Osborne Clark, as saying: ‘It’s anecdotal, but we are seeing lots of it.’ Agencies were ‘being forced or encouraged’ by clients to charge VAT on the margin only.
The Tribunal held that in providing temporary staff to its clients, Reed was supplying introductory services rather than making supplies of staff. The company was only liable to account for VAT on the commission element of its charge, HMRC said in Revenue & Customs Brief 32/11.
In the earlier case of Hays Personnel Services Ltd (14882, LON/95/2610) the Tribunal had decided that Hays was a principal and VAT was due on the whole consideration received.
HMRC do not regard Reed, which was decided on its particular facts, as having ‘any wider impact’. Their view of the correct VAT treatment for employment bureaux remains that set out in VAT Information Note 03/09.
‘In essence a bureau acting as an agent only has to account for VAT on its commission whereas a bureau acting as a principal has to account for VAT on the full amount charged to clients including the temps’ wages and employers’ national insurance contributions,’ HMRC said.
Deloitte said that, despite HMRC’s statement, ‘we consider that there could be opportunities for refund claims as a result of the First-tier Tribunal decision’.
HMRC have warned that their view of the VAT treatment of supplies made by employment bureaux has not changed as a result of the First-tier Tribunal’s recent decision in Reed Employment Ltd v HMRC (TC 1069, LON/2004/0130). Earlier this month Recruiter reportedthat some agencies had begun to charge VAT ‘on the margin rather than the full amount of their invoices’ on the basis of the decision published in April.
Recruiter quoted Kevin Barrow, a Partner at Osborne Clark, as saying: ‘It’s anecdotal, but we are seeing lots of it.’ Agencies were ‘being forced or encouraged’ by clients to charge VAT on the margin only.
The Tribunal held that in providing temporary staff to its clients, Reed was supplying introductory services rather than making supplies of staff. The company was only liable to account for VAT on the commission element of its charge, HMRC said in Revenue & Customs Brief 32/11.
In the earlier case of Hays Personnel Services Ltd (14882, LON/95/2610) the Tribunal had decided that Hays was a principal and VAT was due on the whole consideration received.
HMRC do not regard Reed, which was decided on its particular facts, as having ‘any wider impact’. Their view of the correct VAT treatment for employment bureaux remains that set out in VAT Information Note 03/09.
‘In essence a bureau acting as an agent only has to account for VAT on its commission whereas a bureau acting as a principal has to account for VAT on the full amount charged to clients including the temps’ wages and employers’ national insurance contributions,’ HMRC said.
Deloitte said that, despite HMRC’s statement, ‘we consider that there could be opportunities for refund claims as a result of the First-tier Tribunal decision’.
