Hire concessions
Buried deep within the Budget yesterday, the Treasury has announced that the staff hire concession will be withdrawn from April 2009.
The concession has been in place since 1997 and permits employment agencies to charge VAT solely on the commission element of their supplies rather than on the whole cost of placing the temporary worker.
The Recruitment and Employment Confederation said the concessions were vital for recruitment agencies supplying staff on a temporary basis to organisations such as banks, financial institutions, charities, private hospitals and care homes which cannot reclaim the VAT charged to them.
Commenting on the impact of this change Fiona Coombe, director of professional services at the Recruitment and Employment Confederation, said: "The REC has presented a great deal of evidence to Her Majesty’s Revenue & Customs (HMRC) on the impact of the withdrawal of this concession. The regulatory impact assessment conducted by HMRC fails to assess the financial impact for the client organisations, which will now have to find an extra £125m a year to pay the VAT. The cost of taking on vital temporary staff will rocket in sectors where they cannot reclaim the VAT charged to them. This includes vulnerable sectors such as charities providing healthcare and social housing.
"Within the NHS it is also likely to cause a cash flow problem as charges will increase on placing locum doctors. The cost to agencies of changing their invoicing systems has also been woefully miscalculated. This massive change will need to be explained to clients, an additional cost to the recruitment sector. We will be taking up these concerns with HMRC. Ultimately, withdrawing this concession will add additional costs to the recruitment process in a number of key sectors which will impact not only on employers but potentially on opportunities for workers."
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