Withdrawing the VAT Staff Hire Concession will cost temporary staff recruiters, according to the Recruitment and Employment Confederation (REC).

The government will withdraw the short-term measure, which allows recruiters to account for VAT either on their commission or on an amount excluding salary and other associated costs of the staff concerned, in April of next year. The REC will meet this week with HM Revenue & Customs to discuss the matter.

The REC estimate that removing this concession will add £400m to employers’ costs.

Kevin Green, chief executive at the REC, said: “The net result of having to add VAT to the overall cost of taking on temporary and contract workers is likely to be less flexibility, higher costs for UK businesses and fewer jobs available. We are looking for constructive discussions on how we can avoid the fallout from the added costs that the removal of this concession will lead to, at a time when the UK economy can least afford it.”