UK Treasury Urged To Rethink VAT Charges For Temporary Workers

by Robin Pilgrim, LawAndTax-News.com, London

29 September 2008

The UK's Treasury has been urged this week to reconsider its plans to remove a tax concession on staff hired by companies on a temporary basis which would leave them subject to VAT charges.

Under provisions issued by UK Chancellor Alistair Darling in this year's budget, the removal of the staff hiring concession will take effect from April of next year, and will mean that agencies placing temporary workers with companies who do not pay VAT for temps will henceforth be required to pay VAT on all wages accruing to the worker during their placement, plus the agency fee for hiring them.

The Association of British Insurers (ABI) has spoken out this week to urge the government not to ignore the current state of the UK's economy when considering their plans, stating that going ahead with the proposals will have damaging consequences for many companies already under financial strain.

However, HMRC has defended the implementation of the plans, explaining that their introduction is necessary in order to comply with the current EU laws on temporary employment, adding that they have calculated that only 5% of the work provided by agencies will be affected.

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