Agencies must avoid playing Russian roulette on VAT charges, says REC

Agencies must avoid playing Russian roulette on VAT charges, says REC

The REC has issued a reminder that agencies should avoid making changes to the way that VAT is charged on the provision of temporary staff in sectors such as healthcare, charities and financial services.

Following calls from the REC, HMRC published a briefing note last August, confirming the Government's position that recruiters should not change how they charge VAT as a result of the Reed tribunal ruling. Agencies had come under pressure from some clients which is why the REC had called on HMRC to issue a clear steer.

Tom Hadley, the REC's Director of Policy and Professional Services, says:

“HMRC’s position is clear - the Reed tribunal ruling should not in itself result in changes being made. We will continue to remind recruiters and client organizations of the current state of play. Any agency deciding not to charge VAT without having previously obtained detailed legal and tax advice would be taking a significant risk and would essentially be engaging in a game of Russian roulette with the tax man".

"There may be opportunities further down the line to challenge the current HMRC position and we will continue to look at possible ways forward through dialogue with REC members as well as other business organisations and tax experts. However, our immediate priority is to avoid an unlevel playing field where agencies who are doing the right thing and following the HMRC steer are penalised in the market".

The HMRC briefing issued last year can be found at: http://www.hmrc.gov.uk/briefs/vat/brief3211.htm