 VAT cost of temporary staff could rise by 500%
13 March 2008: VAT experts at PKF Accountants & business advisers say the decision to withdraw the staff hire concession from 1 April 2009 could see businesses paying up to 500% more VAT to hire temporary staff.
The concession allows the employment bureaux supplying temporary staff to only charge clients VAT on the margin made, allowing the wages element of the fee to be free of VAT, as long as the client was responsible for paying the temporary staff direct.
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 | PKF VAT partner Gerry Myton says, “This is very bad news for a large number of businesses which are unable to reclaim all their VAT, for example banks, insurers, nursing homes, private hospitals, private schools and colleges, universities and charities. |
“The Government says that it is giving 12 months’ notice of the change to allow businesses to prepare for it, but it is hard to see what can be done to avoid the costs. The only way around this would be to employ temporary staff directly, but the employment law costs involved in doing this are such that most will prefer to take the VAT hit instead.
“The Government has estimated that the concession currently saves UK businesses and NGOs some £255million in total. I think this is an underestimate and some businesses could see a 500% rise in the costs of hiring temporary staff.”
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Notes to Editors:
- PKF is a leading firm of accountants and business advisers with more than 1,800 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
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