A childcare agency in Warwickshire is appealing for support in its legal battle with tax officials over VAT.

A High Court case scheduled to take place next week involving K and L Childcare could prove to be a test case as to whether health and other care sector agencies should charge VAT on their services.

Director Lesley Stanley said she was taking a substantial risk by defending her position in court and could face legal bills totalling £20,000 if the agency loses.

She is calling on the recruitment industry for financial aid to support her case. Her agency faces bankruptcy if she loses the case, she said, and is currently deciding whether or not to proceed.

Agencies in the sector are currently struggling to come to terms with rules introduced earlier this year that in most cases require them to charge VAT at 17.5% for their services.

Previously, most agencies had been able to charge the tax only on their commission – but a ruling in May from Her Majesty’s Revenue and Customs (HMRC) moved the goalposts.

But K and L has already successfully challenged the decision in court – but could now face a High Court hearing after HMRC appealed.

The hearing could establish the legality of HMRC’s interpretation of the law.

“We are the test case and will set the precedent if we go ahead,” Stanley told Recruiter.

Anyone wanting to help can email Lesley on [email protected].