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VAT reclaim from Temporary Staff Ruling

VAT reclaim from Temporary Staff Ruling
 
The Tax Tribunal has ruled in favour of recruitment specialists, Reed, in a case regarding the VAT treatment of temporary workers.  The decision means the education, healthcare, charitable and financial services sectors are all set to benefit, according to Deloitte.
 
Helen Devenney, indirect tax partner at Deloitte, commented: "For organisations that are unable to recover VAT, but have a reliance on temporary labour, the ruling could be hugely beneficial.
 
"It's the difference between VAT being charged on just the commission payable to a temp agency, perhaps 15% to 30% of gross wages, and VAT being charged and not recovered on the whole cost, including commission and salary elements.  This could clearly be a considerable sum to some organisations, especially in those sectors such as healthcare and education, where budgets have been tightened and which rely heavily on temporary staff cover and agency personnel for crucial services."
 
If HMRC do not appeal this aspect of the ruling, it will become final over the coming months and is likely to have retrospective effect.  The door will be left open for many organisations that have paid VAT on these activities to be able to recover huge backdated payments.
 
Devenney added: "Any business that has paid VAT on temporary staff since 1 April 09, and was unable to recover part or all of this is likely to benefit.  The ruling will also affect the temp agencies themselves in terms of how much VAT should be charged to clients."

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